Aussie fixed mortgage rates launch into orbit

Westpac this week ratchetted up fixed mortgage rates by 0.5% across all loan terms:

Westpac fixed mortgage rates

ANZ has been even more aggressive, hiking fixed rates by 0.9%, which has taken rates above 5% for most loan terms:

ANZ fixed mortgage rates

The next table illustrates the sharp lift in fixed rates over the past year, with rates already more than doubling from a year ago:

Sharp rise in fixed mortgage rates

RateCity also notes that if the RBA hikes rates by 0.5% as expected at its next meeting, this will lift monthly variable mortgage repayments by between $333 and $665 on loans between $500,000 and $1 million, compared with repayments before the RBA began its tightening cycle:

Increase in mortgage rates

Commenting on the results, RateCity’s research director Sally Tindall noted that indebted households are facing financial pain:

“While Governor Lowe has poured cold water on suggestions the cash rate could get to 4 per cent by Christmas, the Board is likely to continue its rapid-fire approach to cash rate hikes over the next six months.

“The RBA is ripping the low-rate band-aid off, and quickly. For many Australians it’s going to sting.

“Variable rate borrowers should prepare themselves for another double hike in July and for the cash rate to rise above 2 per cent by Christmas – potentially well above this mark.

Obviously if the futures market gets its way, and the official cash rate hits 3.25% by Christmas and 3.85% by May 2023, then there is going to be blood on the mortgage streets.

Unconventional Economist
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Comments

  1. Jumping jack flash

    Basically we will blindly follow everyone else. 0.75 hike next. Probably 0.5 after that. October will be very interesting. Probably a 1% hike sometime between October and Feb 2023.

    Personally i can withstand 6%, probably 7% mortgage rate before i will need to really start restructuring my expenses, but i am also acutely aware that demand will be destroyed and it is highly likely that many jobs and wages will simply disappear that only exist due to current levels of debt creation and debt spending, including my own job and/or level of wages.

    • Goldstandard1MEMBER

      +1 on the later statements about jobs. Too many people think they are on the sidelines and safe. Most are not safe. That’s why ppl choose to go all in on debt because when it hits the fan, not many are completely spared.
      Personally I’ve aimed to get into sectors that are more recession proof and have been zero debt last two years. It’s always about how long can you go without the FOMO gains without cracking if you believe the inevitable is happening, but timing is impossible to predict.

      • Jumping jack flash

        Not much is recession-proof, possibly just public sector. Pretty much 1930s all over again. My grandfather worked as a civil engineer for the German government in the 30s and 40s and they were considered very lucky and very well off.

        Everything is services and retail of imported goods paid for with debt. Even mining depends on US debt spending in China.

        I work in manufacturing industrial food processing machinery… i’ll see how it pans out, it may be ok but quite likely wages will reduce a fair bit.

      • This

        “Too many people think they are on the sidelines and safe. Most are not safe.”

        Everything is interconnected.

        The thing I am confident on is that if valuations crash, its mostly the banks on the hook as they had prudential responsibility to asses LVR. They did the valuation and if they didn’t think the property was worth X, then they shouldn’t have lent 80-90% of it. The full recourse position of Australian loans only applies if the valuation is valid and someone simply cannot pay.

  2. MathiasMEMBER

    Is it better to have a cheap firesale house on the Beach or in the Bush? I cant decide.

    They’ll be giving Real Estate away in cornflakes packets soon.

    • Jumping jack flash

      If 2008 is any indication of what may happen then banks will hoard repossessed properties and not release them for sale/revaluation because that would mean they would instantly collapse under the weight of all the debt and the colossal LVR.

      A couple of banks will be sacrificed to appease the gods of debt. Probably.

      • They could only legally repossess if the mortgagee still cannot pay on the lower valuation number. They will also have huge amounts of class actions being thrown at them which would slow down the process.

        Pictures of mum, dad and kids on the street will force gov and RBA to intervene.

  3. C.M.BurnsMEMBER

    So, now the banks are insane, along with the RBA, other central banks and also markets (ie, those with actual skin in the game).

    So it’s just MB on the other side of the argument ? Reminds of that liberal senator who in the days after the election said that the liberal party (still) had the correct liberal values, and it was liberal voters who were wrong.

        • Bcnich started bond trader in 80s. Leith seems to be good at commodities. Each to own strength.
          It isn’t actually full retard to be siding with whomever seems to be able to call it better.

          • C.M.BurnsMEMBER

            well put. I’d say that DLS is strong in commodites, Leith seems much better at the labour market andr related subjects.

            both of them had a blind spot the size of a small planet when it came to global inflationary pressures

          • Banks should have collapsed and been nationalised twice already according to your chosen messiah and that remains the prediction today, so backing that horse requires quite the flexible position on forecasting accuracy.

            I agree with the premise though that while MB may prove to be right on the destination, they are likely underestimating the path to it and rates have a good shot of hitting the levels predicted, especially if unemployment stays low and wage pressure continues.

            We will be at a 1.5% OCR before we know it, RBA has said they are ‘data dependant’ and outside of a major shock, demand crushing credit conditions will take time to flow through the system by which point the RBA will be well beyond 1.5%. Also, after having been accused of being late the party, highly unlikely they will be leaving it early.

          • Sorry I did mean DLS. But those directional changes on the Interest rates and bond movements, there is some usefulness in those.
            BB_AU, I agree with that, does need some flexible positioning to take that one to the bank. However, I do still actually see that the banks have been bailed out twice already – once during GFC with a direct credit line to the feds – that wasn’t declared, released to media until 2010 that forces the fed to release their doings 3 yrs after the txn. Second, TFF is a bailout. They just don’t call it that, because it’s a manageable bailout. But it is tax payer funds used to provide funding to banks at a subsidised cost – quacks like a duck and all.
            So you’re going to now get into the technicalities of a “Central Bank manageable bail out of the banks” or a “Bailout of the banks that is unmanageable for the CBs” – that’s what anybody gets a prize for here..
            Writing on the wall if that’s the case, why argue. They’ll fail one day and it’s nearly ridiculous the whole world sits there each wobble and goes “is it now?? Now? NOW? ohh.. now….??”

  4. Camden HavenMEMBER

    All this panic and the Fed has only STOPPED BUYING BONDS. the last week or two had planned to let bonds roll off the balance sheet. Just getting started

  5. In the 1980s Paul Keating bankrupt a lot of property investors by hiking interest rates to 18%. Those people have never forgiven him for that, and never voted labour since. In retrospect, it is now regarded as a mistake by Paul Keating, as we he was trying to reduce the current account deficit. It turns out there is nothing wrong with running a massive current account deficit.

    This time is similar. If the RBA increases rates from 0.25% to around 2% it is equivalent (or worse) to what Keating did as Keating went from 6% to 18% which is 3 times.
    There will be alot of property investors that will go bankrupt. There is no way that Lowe is that stupid. He does not want to go down in history as the man who bankrupt a whole lot of Australians, and the Labour govt wont allow it either. Plus most of the inflation is supply side inflation, not demand side inflation. Therefore it would also go down in history an another policy mistake.

    The RBA hiking by 50bps in June, and then Lowe going on 7:30 was to drastically alter peoples inflation expectations. I would say that the job has been done. All everyone talks about is inflation, and tightening the belt. I am willing to bet they hike by another 25bps in July, and then they are done!

    $A to to go to low 60s, as the US will continue to hike as they are nutz over there!

    • But markets at the time said there was a lot wrong with running big current account deficits, Keating was responding to the markets, the ones who lent the country money

    • Oh Totes where art thouMEMBER

      There will be alot of property investors that will go bankrupt.

      And this is a bad thing? We know that the percentage of properties negatively geared is in the mid to high 90s (I forget the exact value, I’m sure LVO knows) to existing stock. Very little new builds are negatively geared meaning the majority of property investors are just speculating on the greater fool theory. Maybe it’s time property became more affordable.

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