CBA joins rest of big four, hikes fixed rates ahead of RBA decision next week

The Commonwealth Bank (CBA) has joined the rest of the big four banks in hiking its fixed rates as analysts predict the Reserve Bank of Australia (RBA) will lift rates next week, and then again in November.

Commbank on Tuesday lifted its fixed rates on both owner-occupied and investor loans for new customers by as much as 0.48 percentage points.

According to Canstar, 16 lenders have raised their fixed rates this month, including the other three majors Westpac, NAB and ANZ which all increased their fixed reates by up to 0.20 percentage points last week.

The lowest fixed rate available from a big four bank is now 6.49 per cent for a one-year term from ANZ, and a two-year term from NAB and ANZ.

Canstar data insights director Sally Tindall said the hike was a “hefty blow”.

“A 0.48 percentage point increase isn’t a tweak, it’s a clear signal Australia’s biggest bank is bracing for higher borrowing costs ahead,” Tindall said.

She said while seven lenders were still offering fixed rates in the fives to owner occupiers, even those offers may disappear if rates are hiked again next week.

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“While the major banks have now pushed their lowest fixed rates well into the sixes, borrowers shouldn’t assume the fixed rate market is completely devoid of competition,” Tindall said.

“Anyone considering a fixed rate would do well to look beyond the majors and take their time weighing up their options.”

Based on the CBA’s forecast of a rate hike this month and then two cash rate cuts from August 20207, analysis by Canstar shows a borrower with a $600,000 mortgage and 25 years remaining could save an estimated $776 in interest over the next 12 months by opting for the lowest 1-year fixed rate rather than the lowest variable rate.

But Tindall said the cash rate wasn’t set in stone and a lot of borrowers would likely opt to “ride it out”.

Last week RBA Governor Michelle Bullock confirmed her inflation fears had “materialised”.

She said there was little sign of conflict in the Middle East being resolved and the recent rise in oil prices would add directly to inflation.

“This was expected, but it is important that these effects remain contained and do not become embedded into price and wage setting decisions,” Bullock said.

“Otherwise, inflation could prove more persistent and require a stronger policy response.”

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