“Incredible” fixed mortgage rates soar into stratosphere

Last week, Westpac and ANZ hiked their fixed mortgage rates by 0.5% and 0.9% respectively, which more than doubled fixed rates from a year earlier.

Yesterday, Australia’s biggest bank CBA joined the fold hiking its fixed rates by a whopping 1.4% across all loan terms:

CBA fixed rate hikes

This has taken CBA’s fixed mortgage rates to more than double or triple the level of a year ago, depending on the loan term:

CBA fixed rate change

RateCity.com.au research director Sally Tindall described the hikes as “incredible” and expects other banks to follow CBA’s aggressive lead:

“Today’s fixed rate hikes from Australia’s biggest bank are anything but typical”.

“The bank is responding to the rising cost of fixed rate funding and a market that refuses to believe the RBA will stop hiking the cash rate at around 2.50 per cent,” she said.

“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.

“It’s incredible to see fixed rates move this dramatically in such a short space of time. The sub-2 percent fixed rates from 12 months ago now seem like a distant dream.

“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”.

Fixed mortgage rates are now universally high across the major banks:

Fixed mortgage rates across banks

Variable rates are currently much lower, but will catch up with fixed rates as the Reserve Bank hikes aggressively.

If the futures market gets its way, and the official cash rate hits 3.15% by Christmas and 3.7% by June 2023, then the average discount variable mortgage rate will soar to 7%:

Australia's discount variable mortgage rate

Futures market: 7% discount variable mortgage rate by June 2023.

Then there will be blood on the mortgage streets and the housing market will crash.

Unconventional Economist
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Comments

  1. Geez, my fixed rate loan is now worth 6 figures! Or it would be if my dickhead bank would pay it out.

  2. “Oh, so that’s your little plan! Get us ADDICTED then jack up the price!”
    H. J. Simpson

  3. How long will banks continue to suck in more borrowers on variable loans at 2.6%? surely these have to rise fast pretty soon.

  4. Massive jumps like this do not seem like the behavior of a bank operating on business as usual terms.
    I wonder if APRA is active behind the scenes battening down the hatches for what is coming. I note the biggest change is at the bank that went the craziest during the Pandemic and would have the largest risk exposure as a result.

    • Quantitative FleecingMEMBER

      They probably have more info on the current inflation rate. You’re right, it doesn’t make sense that publicly they say they expect neutral rate to stabilise at 2%, then go and hike their fixed rates 1.4% in one hit. My guess is the inflation figures released in July will be over 7% (and heading to double digits by end of year) at which point markets will freak out, and the RBA may be forced into a 75bp rate rise or two, just like the Fed did. Futures markets have been right so far, I don’t see why they won’t continue to be.

    • The Grey RiderMEMBER

      Someone said it yesterday…hidden plans.
      Planned demolition…globally.