More borrowers will now be forced onto variable rate packages given the high cost of fixed rates.
The biggest rate hike on record by Australia’s biggest bank will put homeowners at the mercy of the Reserve Bank, with the move set to be followed across the board by lenders.
CBA announced Thursday that its entire fixed rates offerings would increase by 1.4 percentage points, with none of its owner-occupier packages below 4.99 per cent.
RateCity.com.au research director Sally Tindall said the move was extraordinary.
“Today’s fixed rate hikes from Australia’s biggest bank are anything but typical. We haven’t seen one-off hikes of this size and scale from CBA in our records,” she said.
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The CBA is the first of the big banks to move so aggressively against fixed rates. Picture: NCA NewsWire / Sarah Marshall.
“It’s incredible to see fixed rates move this dramatically in such a short space of time. The sub-2 per cent fixed rates from 12 months ago now seem like a distant dream.”
Proptrack economist Paul Ryan said those fixed rate increases were because of the wide expectation that RBA’s cash rate target would continue to rise.
“It’s another blow to buyers,” he said. “You might think someone buying would fix rates but the pricing does not seem to be favourable to do that, so a lot of people would take variable. Buyers are now at the mercy of the RBA.”
Interest rate hikes are expected to weigh heavily on house prices for the rest of the year.
The RBA board is due to meet for its monthly monetary policy meeting on Tuesday.
Ms Tindall said CBA was responding to increased costs with fixed rate funding and disbelief across the market that RBA would stop when the cash rate target get to 2.5 per cent.
“Less than a year ago, CBA was still offering one fixed rate under 2 per cent. Today the bank’s lowest fixed rate is just under 5 per cent, while the majority are well over 6 per cent,” she said.
“We expect other banks will follow in CBA’s wake. Westpac and NAB’s fixed rates are now, in many cases, over a percentage point lower. It’s only a matter of time before these banks hike fixed rates again.”
RateCity said the change came less than two weeks CBA increased rates for both new and existing variable customers by half a percentage point.
The bank has shifted its focus to taking non-fixed rate customers, cutting its lowest variable home loan rate by 0.15 percentage points, to 2.79 per cent.
But Ms Tindall said the catch was it was only for new customers with a 30 per cent deposit.
“Once again, loyal customers are getting the raw end of the deal. CBA customers on the Extra Home Loan should call up the bank and ask for this discount. If the bank doesn’t budge, it could be time for them to take their home loan shopping to a bank willing to lower their rate,” she said.
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