Home lenders are expected to start hiking variable rate mortgages after the Reserve Bank’s decision to boost official rates by 25 basis points.
Commonwealth Bank, the country’s largest home lender, last night kicked off the rate hike spree by announcing across-the-board repricings of its variable rate mortgage range.
The bank’s new reference rate on standard variable loans marketed to owner occupiers has increased 25 basis points to 4.8 per cent.
Investor principal and interest loans have been repriced to 5.38 per cent.
ANZ was the next to move. It fattened its standard variable rate for owner occupiers paying principal and interest 25 basis points to 4.64 per cent.
“While this change will impact customers in different ways, home loan customers are generally well placed to manage rising rates with around 70 per cent of accounts ahead on repayments – many of them by two years or more,” said ANZ’s head of retail banking, Maile Carnegie.
“Household and business deposits are also at record highs."
Westpac will increase home loan variable interest rates by 25 bps.
Westpac will also increase interest rates for selected consumer deposit accounts by 25 bps.
NAB this morning lifted variable rates by 25 bps.
NAB also added 25 bps to bonus saver rates.
The RBA’s decision brings to an end more than a decade of monetary easing and mortgage experts are forecasting that almost every home lender in the country will pass on the full official rise to variable rate borrowers.
“I think we will see a stack of repricing moves in the next 48 hours and most will pass on the full 0.25 per cent,” said Canstar director, Steve Mickenbecker.
Mickenbecker is not expecting lenders to reprice higher than 0.25 per cent because history showed such moves carried heavy reputational risks at the start of a tightening cycle.
“I think most lenders would be reluctant to go by more than the first official rate increase because history tells us that the public backlash can be severe,” he said.
“However, I think we could see some out of cycle increases in coming months because lenders have been competing aggressively for variable rate borrowers and that has driven down the average SVR to 2.98 per cent.”
The shift in monetary policy came more than two years before RBA Governor Philip Lowe previously indicated the central bank would contemplate raising official rates.
In his statement following the June 2021 board meeting, Lowe stated that it was “unlikely” that the official cash rate would be increased earlier than June 2024.
The RBA board has attracted criticism for such guidance given that it may have induced or encouraged some first homebuyers to acquire properties over the last 11 months.
The governor yesterday conceded that the official rate increase came earlier than the RBA’s guidance of less than 12 months ago.
“I acknowledge that this increase in interest rates comes earlier than the guidance the Bank was providing during the dark days of the pandemic,” he told a briefing in Sydney.
“During that period, especially in 2020, the national health situation was precarious and the economic outlook was dire and clouded by great uncertainty.
“The Board wanted to do everything it could to help the country get through that difficult period.
“In those unprecedented times, we judged that the economic damage from the pandemic was likely to require that interest rates remain at very low levels for years.”
Lowe yesterday also conditioned borrowers for further rate rises.
However, he also said that the RBA board was not on “a pre-set path” and that future monetary policy decisions would be guided by evidence and data.