The big banks have raised their mortgage rates following the decision to lift the cash rate to 1.35 per cent.
The Reserve Bank of Australia raised the rate by 50 basis points to 1.35 per cent on Tuesday, marking the third consecutive rise in a row.
Commonwealth Bank was the first to jump, saying on Wednesday morning it would pass on the rise in full by increasing rates on its variable home loan products. Two big bank rivals, ANZ and NAB followed later in the day, along with Macquarie Bank.
“We are here to support our customers and have a range of tools to help them manage their repayments online … We understand the rapidly changing rate environment may raise questions for some of our customers and we are here to help them,” CBA group executive, retail banking, Angus Sullivan, said.
The CBA’s new rates come into effect from July 15, with the standard variable rate for owner-occupied borrowers rising by half a percentage point to 5.90 per cent a year.
Rates on other products have risen to 6.20 per cent, 6.38 per cent and 6.64 per cent.
The bank has also lifted deposit rates by half a percentage point, with interest on its GoalSaver account rising to 1.25 per cent.
“These new deposit rate changes, combined with the increases we’ve made over the past two months, will help deliver better savings outcomes for our customers, however they are looking to save,” Mr Sullivan said.
The ANZ followed with similar jumps for its variable rate mortgages, also from July 15.
It has also raised the interest rate on its 11-month Advance Notice term deposit to 2.50 per cent, from July 11, and will increase the bonus interest rate on Progress Saver accounts and ANZ Plus accounts by half a percentage point.
The ANZ said its decision to lift rates came after considering various factors, including the RBA move, the impact on customers, business performance and competition.
RateCity.com.au research director Sally Tindall said the rapid rises were no surprise.
“Borrowers on variable rates need to prepare for more pain, as the RBA has indicated more hikes are on the way,” she said.
“Since the RBA started hiking, it has been a mixed bag for savers, with banks picking and choosing which account they increase each month.
“This time we’ve seen both CBA and ANZ so far hike their popular bonus savers but leave their online accounts untouched.”
By late Wednesday afternoon, Westpac was the only one of the big four lenders yet to make an announcement.
The latest rises came just a week after the Commonwealth and NAB imposed super-sized hikes on fixed-interest mortgages of up to 1.10 percentage points.
This week’s Reserve Bank’s rate rise is estimated to add $137 a month to a $500,000 mortgage, or $499 a month to a $750,000 loan.
The central bank board also flagged further rises, with some economists expecting the cash rate to hit 3.5 per cent next year.
The Reserve Bank is planning a series of rate rises to get inflation back to its 2-3 per cent target band.
“The board is committed to doing what is necessary to ensure that inflation in Australia returns to target over time,” Reserve Bank Governor Phillip Lowe said in a post-decision statement.
Inflation is sitting on 5.1 per cent and is expected to head towards 7 per cent by the end of this year.
Treasurer Jim Chalmers on Wednesday warned of tougher economic times ahead.
“It is going to be an incredibly difficult period for people, they should brace themselves for high and rising inflation and more rising interest rates, unfortunately,” he told ABC Radio on Wednesday.
“But things will get better. It’s the expectation of the Reserve Bank … that inflation will moderate next year. It will come back down to more normal levels, that will obviously be a big release to people.”
Dr Chalmers is expected to provide an economic update when federal Parliament resumes at the end of the month, before handing down his first budget in October.
“The budget will be all about implementing an economic plan, which includes things like investment in skills, it includes investment in cleaner and cheaper energy, it includes more affordable childcare,” he said.
“If you’re the treasurer in a new government, you need to focus on the things that you can influence.
“The constraints we have in our economy have been building for the best part of a decade.”
Dr Chalmers said while Australia was not expected to enter a recession, there could be economic consequences should that happen in the US.
“They’ve got higher, higher inflation, and they’ve got a central bank that’s going to have to do a lot of work to try and rein that inflation in,” he said.
– with AAP