The Commonwealth Bank of Australia (CBA) has raised its fixed mortgage rates by a whopping 1.4%, just days before the next Reserve Bank board meeting.
Key points:
- The CBA’s lowest fixed rate is now just below 5%.
- The bank has raised fixed mortgage rates by a whopping 1.4% for one- to five-year loans.
- Meanwhile, the Reserve Bank is expected to raise interest rates again next week
Fixed mortgage rates for homeowners and investors, for one- to five-year loans, have increased.
However, the bank has cut its lowest variable-rate home loan rate by 0.15 percentage points, to 2.79 percent, for new customers with a 30 percent deposit.
RateCity.com.au research director Sally Tindall, the size of the rate hikes is different from anything she has seen since the ABC.
She expects other major banks to raise rates in response.
Fixed rates rose rapidly
“We have not seen one – off excursions of this size and scale [the] CBA on our records, ”Ms Tindall said Thursday.
“The bank is responding to the rising cost of fixed rate financing and a market that refuses to believe that the Reserve Bank will stop raising the cash rate by around 2.50 per cent.
“Less than a year ago, CBA still offered a fixed rate below 2 percent. Today the bank’s lowest fixed rate is just under 5 percent, while most are well above 6 percent.” , he said.
“It’s amazing to see fixed rates move so dramatically in such a short period of time,” he said.
Tindall said he expects other major banks to follow CBA’s example.
“Westpac and NAB’s fixed rates are now, in many cases, more than one percentage point lower,” he said.
“It is only a matter of time before these banks raise fixed rates again.
“While CBA could have turned its back on competition in the fixed rate sector, it has set its sights well on attracting new variable rate customers.”
The Reserve Bank hoped to raise rates again
The RBA board will meet next week, Tuesday, to discuss raising the cash rate target.
Earlier this month, the council raised the cash rate target from 0.35% to 0.85%.
Economists believe it will raise the target again next week, in an attempt to convince the population that it has not lost control of inflation.
The overall rate of consumer inflation was 3% in the September quarter of last year and reached 5.1% in the March quarter.
When the RBA raised the cash rate target to 0.85 percent this month, the four major banks raised their rates in response.
RBA Governor Philip Lowe warned last week that inflation was coming more and more from Australia.
He said the proportion of goods and services in the consumer price index (CPI) basket experienced annual price increases of 3% or more, its highest increase since 1990.
However, he said, he did not see a recession in Australia at this stage, in part due to the underlying strength in the labor market.
On Thursday, new data from the Australian Bureau of Statistics showed there were 480,100 job vacancies in May, 13.8% more than in February.
The level of vacancies in May 2022 was 111.1% higher than in February 2020, before the start of the pandemic.