Commonwealth Bank and NAB have raised fixed rates

Commonwealth Bank and NAB have raised fixed rates 2
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Another major bank has now raised its fixed mortgage rates in a clear sign official interest rates are set to surge at the fastest pace in almost three decades.

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National Australia Bank on Friday joined the Commonwealth Bank in lifting their fixed rates.

Economists with Australia’s biggest banks are widely expecting the Reserve Bank of Australia to raise the cash rate by 0.5 percentage points at its July 5 meeting.

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This would take the cash rate to a three-year high of 1.35 per cent from the existing level of 0.85 per cent.

A July rate rise, following the increases in May and June, would already mark the fastest pace of rises in a short time since late 1994. 

Several more RBA rate rises are expected in 2022 to tackle 5.1 per cent inflation – the worst in two decades with unemployment at a 48-year low of 3.9 per cent.

NAB’s one-year fixed rate is increasing by 1.1 percentage points to 4.69 per cent, from 3.59 per cent.

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National Australia Bank on Friday joined the Commonwealth Bank in lifting their fixed rates (pictured is an Adelaide branch)

National Australia Bank on Friday joined the Commonwealth Bank in lifting their fixed rates (pictured is an Adelaide branch)

NAB raises fixed rates

ONE YEAR: Up 1.1 percentage points to 4.69 per cent from 3.59 per cent

TWO YEAR: Up 1 percentage point to 5.59 per cent from 4.59 per cent

THREE YEAR: Up 0.8 percentage points to 5.79 per cent from 4.99 per cent

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FOUR YEAR: Up 0.8 percentage points to 6.19 per cent from 5.39 per cent

FIVE YEAR: Up 0.8 percentage points to 6.29 per cent from 5.49 per cent

NAB’s two-year fixed mortgage rate is rising by one percentage point to 5.59 per cent, from 4.59 per cent.

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The Commonwealth Bank on Thursday raised its fixed mortgage rates by a massive 1.4 percentage points for both owner-occupiers and investors seeking one to five-year terms, as it warned of another big Reserve Bank rate rise in July.

CBA’s lowest one-year fixed rate is rising to 4.99 per cent from 3.59 per cent.

The Commonwealth Bank, Australia’s biggest home lender, now has the highest one-year fixed mortgage rate.

NAB and ANZ charge 4.69 per cent for a one-year fixed rate, while Westpac has the lowest rate of 4.09 per cent.

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CBA’s five-year rate is increasing to 6.69 per cent from 5.29 per cent.

A RateCity analysis showed more than 70 banks had hiked at least one fixed rate during the past month.

RateCity research director Sally Tindall said NAB’s rise showed the big banks were factoring in financial market expectations of the RBA cash rate climbing above 2.5 per cent.

The Commonwealth Bank on Thursday raised its fixed mortgage rates for both owner-occupiers and investors seeking one to five-year terms, as it warned of another big Reserve Bank rate rise in July. CBA's lowest one-year fixed rate is rising to 4.99 per cent from 3.59 per cent

The Commonwealth Bank on Thursday raised its fixed mortgage rates for both owner-occupiers and investors seeking one to five-year terms, as it warned of another big Reserve Bank rate rise in July. CBA’s lowest one-year fixed rate is rising to 4.99 per cent from 3.59 per cent

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Commonwealth Bank fixed rate surge

ONE YEAR: Up 1.4 percentage points to 4.99 per cent from 3.59 per cent

TWO YEAR: Up 1.4 percentage points to 5.79 per cent from 4.39 per cent

THREE YEAR: Up 1.4 percentage points to 6.39 per cent from 4.99 per cent

FOUR YEAR: Up 1.4 percentage points to 6.59 per cent from 5.19 per cent

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FIVE YEAR: Up 1.4 percentage points to 6.69 per cent from 5.29 per cent

‘The banks are responding to the rising cost of fixed-rate funding, but they’re also factoring in market expectations the cash rate will go beyond the RBA’s suggested neutral cash rate of 2.50 per cent,’ she said.

The futures market is expecting the RBA cash rate to hit 3.1 per cent by December.

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This is significantly higher than CBA’s forecast of a 2.1 per cent cash rate by November, following 0.25 percentage point increase in August, September and November.

Westpac is expecting a 2.35 per cent RBA cash rate by February 2023, following 0.25 percentage point increases in August, November and December.

Westpac chief economist Bill Evans said the RBA was likely to raise the cash rate by 0.5 percentage points at its July meeting. 

‘We confirm our call that the RBA Board will raise the cash rate by 50 basis points next week,’ he said.

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‘The decision in June to move by 50 points indicates that while rates are stimulatory with rising inflation pressures and a 48-year low in the unemployment rate the better policy is to move decisively and signalling clearly that the board is fully committed to returning inflation to its target range in due course.’

Mr Evans said an RBA cash rate of less than 1.5 per cent would be regarded as ‘stimulatory’ and would need to rise above 2 per cent be above the neutral range.

RateCity research director Sally Tindall said NAB's rise showed the big banks were factoring in financial market expectations of the RBA cash rate climbing above 2.5 per cent

RateCity research director Sally Tindall said NAB’s rise showed the big banks were factoring in financial market expectations of the RBA cash rate climbing above 2.5 per cent

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New Commonwealth Bank forecasts on RBA cash rate

JULY: Up 0.5 percentage points to 1.35 per cent

AUGUST: Up 0.25 percentage points to 1.6 per cent

SEPTEMBER: Up 0.25 percentage points to 1.85 per cent

NOVEMBER: Up 0.25 percentage points to 2.1 per cent

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As of this week, no lenders in Australia are offering mortgage rates of less than two per cent.

Before the Reserve Bank raised rates in May, Canstar listed 68 products with that low rate, down from 193 a year ago.

Canstar finance expert Steve Mickenbecker said Australians would be unlikely to see mortgage rates of less than two per cent ever again in their lifetimes.

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‘The May and June Reserve Bank cash rate increases have put an end to an era of home loan interest rates below two per cent, something we may never see again,’ he said.

While fixed rates have risen, the Commonwealth Bank has cut its Extra Home Loan variable rates by 0.15 percentage points, taking the lowest discount rate to 2.79 per cent from 2.94 per cent. 

The more popular CBA variable rate, with less onerous credit card restrictions, is also falling by 0.15 percentage points to 2.89 per cent from 3.04 per cent.

Like its rival Westpac, the Commonwealth Bank is expecting a 0.5 percentage point rise at the RBA’s July 5 meeting, taking the cash rate to 1.35 per cent – the highest level since June 2019.

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The June increase of 0.5 percentage points marked the first half a percentage point hike since February 2000.

The May rise of 0.25 percentage points was the first increase since November 2010.

Another rate rise in July would see the cash rate rise for three months in a row for the first time in almost 12 years.

A half a percentage point rise next month would also mean home borrowers would have copped 1.25 percentage points worth of RBA interest rate rises in just three months.

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This would mark the steepest pace of increases in such a short time since late 1994, during the early years of the internet.

What a 0.5 percentage point rate rise in July means for borrowers

$500,000: Up $136 from $2,079 to $2,215

$600,000: Up $163 from $2,495 to $2,658

$700,000: Up $191 from $2,910 to $3,101

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$800,000: Up $218 from $3,326 to $3,544

$900,000: Up $245 from $3,742 to $3,987

$1,000,000: Up $273 from $4,157 to $4,430

Monthly repayments based on popular Commonwealth Bank variable rate rising from 2.89 per cent to 3.39 per cent should the Reserve Bank cash rate in July rise from 0.85 per cent to 1.35 per cent

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