Commonwealth Bank, ANZ, Westpac, NAB to raise variable mortgage rates by 0.25% after RBA rate hike
All of Australia’s largest banks raised mortgage rates, matching the Reserve Bank’s 25 basis point increase.
- The big four banks will fully pass on the increase in cash rates to variable borrowers
- Westpac and NAB will also increase some savings rates
- Experts say lenders will offer incentives to new customers in the competitive variable market
The RBA raised official interest rates for the first time in more than a decade to curb soaring inflation as the cost of living rose 5.1% over the past year.
Commonwealth Bank was the first major bank to announce an increase in mortgage rates, in line with the RBA’s increase.
The ABC said it would raise variable interest rates on home loans by a quarter of a percentage point from May 20.
This brings the standard variable interest rate for homeowners paying principal and interest to 4.8%.
The equivalent mortgage lending rate for investors will also increase by 25 basis points, to 5.38%.
ANZ also announced that it would pass on the full amount to home loan customers.
For standard variable rate homeowners who pay principal and interest, the indexation rate will increase to 4.64% from 4.39%.
The bank said it would increase monthly repayments by $57 per month on a $450,000 home loan.
For those who only have interest-bearing loans, the interest rate will increase to 5.19%.
ANZ said the new tariffs would come into effect on May 13.
According to RateCity, when banks pass on the rate hike in full, the average borrower with a $500,000 loan and 25 years remaining will see their repayments increase by $65 per month.
Someone with a $1 million loan will see their repayments increase by $130.
However, the CBA and ANZ announced no changes for savers, and RateCity’s research director Sally Tindall said it was “a worrying sign”.
“The CBA and ANZ have not yet indicated what they intend to do with their deposit rates, and that could be bad news for savers,” she said.
Westpac followed suit, saying it would raise variable interest rates on home loans by 0.25% for new and existing customers from May 17.
The company said it would also raise interest rates on select consumer deposit accounts, including Westpac Life, Westpac 55+ and Retired, by 0.25%.
The NAB announced on Wednesday that it was following suit, fully passing on the Reserve Bank’s 25 basis point interest rate hike.
It also raised rates on some savings accounts, with changes due to begin on May 13.
“The market remains extremely competitive”
It is estimated that more than one million homeowners have never experienced an interest rate hike.
Even with an increase in rates, competition would remain strong in the variable rate market.
“The market remains extremely competitive,” said David Zammit, national sales manager for Mortgage Choice.
Homestar Finance said it would keep its lowest rate for new customers of 1.79% unchanged.
Reduce Home Loans also said it would offer at least a variable rate below 2%.
Experts expect more lenders to keep at least a variable rate below 2% for their new customers.
Although the official cash rate hike was relatively small, economists say there is likely to be a series of interest rate hikes before the end of the year.
The ABC predicted that the cash rate could reach 1.6% in February 2023, before pausing.
“We then expect a further rate hike of 25 basis points in February 2023 which would see the target rate at 1.60%.
“From there, we have the policy rate pending on 2023.”
Westpac previously predicted the cash rate could reach 2% by May 2023.
If that happens, the average borrower with $500,000 in debt could see their repayments increase to a total of around $511 by May 2023.
“Increases in reimbursements may not seem exaggerated, but with wage growth lagging behind increases in the cost of living, this will add to the financial strain on many households,” said Steve Mickenbecker, financial expert at Canstar.
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