Three of the four major banks have increased mortgage rates by 0.5 percentage points, passing on the Reserve Bank’s latest rate rise to customers in full.
The Commonwealth Bank of Australia and ANZ on Wednesday followed Westpac in announcing an increase in variable mortgage rates, which will come into effect towards the end of next week.
The Reserve Bank increased the cash rate by 0.5 percentage points on Tuesday afternoon. Credit:Paul Rovere
The Reserve Bank on Tuesday announced a 0.5 percentage point rise in official interest rates, the biggest one-month increase in more than two decades, taking the cash rate to 0.85 per cent.
Westpac was the first major lender to increase mortgage interest rates on Tuesday night, followed by Macquarie Bank, CBA and ANZ on Wednesday afternoon.
In a statement, the CBA’s retail banking services group executive Angus Sullivan said the new home loan variable interest rates will take effect on June 17.
“We are here to support Australian households who may be concerned about their home loan repayments,” he said. “We encourage customers to contact us to discuss the options available to them including ensuring offset accounts are set up and linked to their eligible home or investment loan.”
CBA also announced it would increase the bonus interest rate on several of its savings products by 0.5 per cent, and extend the availability of its 18-month term deposit offer of 2.25 per cent.
ANZ’s head of retail banking Maile Carnegie said: “We know rate changes affect customers differently and some may be looking for support as they reorganise their household budgets, particularly if they haven’t experienced many rate increases before.”
The 0.5 percentage point change will increase monthly repayments by $115 on an average home loan of $450,000 for an owner-occupier paying principal and interest, ANZ says. The increase will come into effect from June 17.
Westpac will lift variable home loan rates by 0.5 percentage points from June 21. It said it would also offer a one-year term deposit rate of 2.25 per cent and other deposit rates were under review.
RateCity said monthly repayments on an average new loan in NSW would lift by $208 as a result of the increase, while repayments on an average new loan in Victoria would rise by $169 a month.
The Reserve Bank warned there would be further rate rises to come and analysts are predicting another 50 basis point rise in July, which would take the cash rate to 1.35 per cent.
Morgan Stanley economist Chris Read said Tuesday’s rate hike was higher than most expected, with inflation risks driving a sharp change in messaging from the RBA. “The RBA is now clearly more centrally focused on inflation and willing to accept greater growth risks on its tightening path,” he said.
He predicted a further hike of 50 basis points in July and August, and 25 basis points from September to November to bring the cash rate to 2.6 per cent by the end of the year.
Jarden’s chief economist, Carlos Cacho, said the larger-than-expected rake hike was driven by the RBA upgrading its inflation and wages outlook, and being emboldened by the underlying strength in the economy. “While we agree that a more aggressive path for rates is warranted by the inflation outlook, the rapid loss of momentum across the economy suggests some risk from this strategy,” he said.
He said he expects the RBA to increase rates by 50 basis points in both July and August, with the cash rate reaching 2.5 per cent by the end of 2022.
The RBA’s rate rise sparked a fall in bank shares which continued on Wednesday, as investors worried about the risk of higher bad debts.
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