The Commonwealth Bank of Australia has joined Westpac and Macquarie Bank in increasing mortgage rates by 0.5 percentage points, as it passes on the Reserve Bank’s latest rate rise to customers in full.
In a statement, the CBA’s retail banking services group executive Angus Sullivan said the new home loan variable interest rates will take effect on June 17.
“We are here to support Australian households who may be concerned about their home loan repayments,” he said. “We encourage customers to contact us to discuss the options available to them including ensuring offset accounts are set up and linked to their eligible home or investment loan.”
The Reserve Bank increased the cash rate by 0.5 percentage points on Tuesday afternoon. Credit:Paul Rovere
The Reserve Bank on Tuesday announced a 0.5 percentage point rise in official interest rates, the biggest one-month increase in more than two decades, taking the cash rate to 0.85 per cent.
Westpac was the first major lender to increase mortgage interest rates on Tuesday night followed by Macquarie Bank.
CBA also announced it would increase the bonus interest rate for several of its savings products by 0.5 per cent, and extend the availability of its 18-month term deposit offer of 2.25 per cent.
“It has been a challenging time for many savers who have experienced a long period of record low interest rates,” Sullivan said. “We hope these changes provide some much-needed support for our customers looking to save.”
Westpac will lift variable home loan rates by 0.5 percentage points from June 21. It said it would also offer a one-year term deposit rate of 2.25 per cent and other deposit rates were under review.
RateCity said monthly repayments on an average new loan in NSW would lift by $208 as a result of the increase, while repayments on an average new loan in Victoria would rise by $169 a month.
The Reserve Bank warned there would be further rate rises to come and analysts are predicting another 50 basis point rise in July, which would take the cash rate to 1.35 per cent.
Morgan Stanley economist Chris Read said Tuesday’s rate hike was higher than most expected, with inflation risks driving a sharp change in messaging from the RBA. “The RBA is now clearly more centrally focused on inflation and willing to accept greater growth risks on its tightening path,” he said.
He predicted a further hike of 50 basis points in July and August, and 25 basis points from September to November to bring the cash rate to 2.6 per cent by the end of the year.
Jarden’s chief economist, Carlos Cacho, said the larger-than-expected rake hike was driven by the RBA upgrading its inflation and wages outlook, and being emboldened by the underlying strength in the economy. “While we agree that a more aggressive path for rates is warranted by the inflation outlook, the rapid loss of momentum across the economy suggests some risk from this strategy,” he said.
He said he expects the RBA to increase rates by 50 basis points in both July and August, with the cash rate reaching 2.5 per cent by the end of 2022.
The RBA’s rate rise sparked a fall in bank shares which continued on Wednesday, as investors worried about the risk of higher bad debts.
Following the surprise move, Commonwealth Bank economists lifted their forecast for the cash rate this year and predicted a 0.5 percentage point cash rate increase in July, followed by a 0.25 percentage point move in August. CBA economists also said they would cut their forecasts for economic growth for 2022 and 2023.
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