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Homeowners’ grief as two of Australia’s biggest banks raise interest rates AGAIN, even before any Reserve Bank announcement
- NAB and Commonwealth Bank raised fixed rates
- The Reserve Bank is inclined to raise rates next week
Two of Australia’s largest banks have increased their fixed rates on home loans with high inflation likely to see tighter monetary policy in 2023.
Both Commonwealth Bank and NAB announced the change on Wednesday, with the Reserve Bank of Australia expected to raise the cash rate again on Tuesday of next week.
While fixed-rate mortgages for new customers don’t automatically increase according to RBA moves, the increases often reflect banks expecting more increases.
All of Australia’s big four banks expect another 0.25 percentage point rate hike on March 7 to a new 10-year high of 3.6% with inflation at 7.8%, a 32-year high, a level well above the 2 to 3 of the RBA. target percentage.
Commonwealth Bank said the changes will apply to fixed-rate loans, including work-in-progress applications starting Wednesday, March 1.
One-year fixed-rate owner-occupant loans have increased between 0.4% and 6.2%.
The two-year rate is 6.39 percent, up 0.1 percent, and a three-year rate is 0.20 percent, up 6.29 percent.
NAB has changed the interest rate on your home loan. Image: NCA NewsWire/Kelly Barnes
There has been no change to the six and seven year fixed rate loans.
Loans financed on or after March 1 will automatically receive the new rates along with any approved discounts if the loan was not rate locked.
All rate movements are effective immediately with no grace period.
NAB owner-occupied customers have seen their rates increased by 0.20 percent to 6.44 percent.
It comes after Westpac’s chief economist explained the gloomy economic outlook behind the top bank’s prediction of rate cuts, and delivered a warning to RBA chief Philip Lowe.
The big bank released a weekly report on Monday forecasting seven interest rate cuts in 2024 and 2025, but not before rates soar to 4.1 percent in just four months.
Westpac’s chief economist, Bill Evans, said the economy would be “stuck” in the September quarter of this year.
Bill Evans Westpac’s chief economist has said the economy will be “in a flat state” in September. Photo: NCA Newswire
Inflation will be around 4% at the end of the year and will fall one percentage point during 2024, according to its updated forecasts.
The main bank now also expects the unemployment rate to rise from 3.5 percent to 5 percent by the end of 2025.
Evans said this would trigger the Reserve Bank to start cutting rates in the March quarter of next year, but warned there was a risk they would act too late.
The rate increases would be the highest in more than a decade if Westpac’s forecast for increases in March, April and May come true.
The bank does not see inflation reaching the 2-3 percent target until June 2025.
The recent report surprises Westpac customers after the bank insisted the cash rate would peak at 3.85 percent in May of this year.
Since May of last year, borrowers have been hit by nine consecutive rate hikes.
The RBA has aggressively raised interest rates in a bid to rein in runaway inflation, which hit 7.8 percent in December.
It was a peak not seen since 1990 in Australia.