Commonwealth Bank raises fixed mortgage rates by 1.4%
The Commonwealth Bank of Australia (CBA) raised its fixed mortgage rates by 1.4%, just days before the next Reserve Bank board meeting.
- The CBA’s lowest fixed rate is now just under 5%
- The bank raised fixed mortgage rates by 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, were all pushed higher.
However, the bank cut its lowest variable home loan rate by 0.15 percentage points, to 2.79%, for new customers with a 30% deposit.
Sally Tindall, research director of RateCity.com.au, the scale of the rate hikes is unlike anything she’s seen from the ABC.
She expects other big banks to raise rates in response.
Fixed rates quickly raised
“We haven’t seen one-off hikes of this size and magnitude since [the] CBA in our records,” Ms Tindall said Thursday.
“The bank is reacting to the rising cost of fixed rate funding and a market that refuses to believe that the Reserve Bank will stop raising the cash rate to around 2.50%.
“Less than a year ago, the CBA was still offering a fixed rate below 2%. Today, the bank’s lowest fixed rate is just under 5%, while the majority exceeds well over 6%,” she said.
“It’s amazing to see fixed rates move so dramatically in such a short time,” she said.
Ms Tindall said she expects other big banks to follow the CBA’s lead.
“Westpac and NAB fixed rates are now, in many cases, more than a full percentage point lower,” she said.
“It’s only a matter of time before these banks raise fixed rates again.
“While CBA may have turned its back on competition in the fixed rate space, it has its sights set on attracting new variable rate customers.”
The Reserve Bank is expected to raise rates further
The RBA board will meet next week on Tuesday to discuss lifting the cash rate target.
Earlier this month, the board raised the target cash rate from 0.35% to 0.85%.
Economists believe he will raise the target again next week, in his attempt to convince the public that he has not lost control of inflation.
The headline consumer inflation rate was 3% in the September quarter of last year, and it reached 5.1% in the March quarter.
When the RBA raised the cash rate target to 0.85% this month, the big four banks raised rates in response.
RBA Governor Philip Lowe warned last week that inflation was increasingly coming from within Australia.
He mentioned the share of goods and services in the consumer price index (CPI) basket that saw annual price increases of 3% or more, their biggest increase since 1990.
However, he said, he did not see a recession happening in Australia at this stage, partly because of the underlying strength of the labor market.
On Thursday, new data from the Australian Bureau of Statistics showed there were 480,100 vacancies in May, up 13.8% from February.
The level of vacancies in May 2022 was 111.1% higher than in February 2020, before the start of the pandemic.
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