First of the Big Four banks hike interest rates in the wake of Reserve Bank rate rise: Here’s what you need to know

  • Commonwealth Bank is first big four bank to raise variable mortgage rates 
  • The 0.5 percentage point increase match Reserve Bank’s August cash rate rise
  • The new varible mortgage rate increases are coming into effect on August 12 

The Commonwealth Bank and ANZ have become the first of Australia’s big four banks to raise variable mortgage rates to match the latest Reserve Bank increase.

CBA, Australia’s biggest home lender ,announced it was increasing variable rates by 0.5 percentage points after the RBA on Tuesday raised the cash rate by 50 basis points to a six-year high of 1.85 per cent. 

ANZ became the second bank a few hours later to also raise its variable rates in line with the official cash rate increase.

Like the Commonwealth Bank, its increases are also coming into effect on August 12. 

Westpac became the third of the big four banks later in the afternoon with its increase taking place on August 18. 

Virgin Money and Bank of Queensland will lift their variable home interest rates by half a percentage point from August 9.

The latest development means some CBA customers will have a variable rate of 3.89 per cent, up half a percentage point from 3.39 per cent. 

A two-day ‘radio silence’ delay by the banks in announcing variable rate increases, far from being welcomed, is seen by finance experts as being bad news for savers. 

CBA’s group executive of retail banking Angus Sullivan acknowledged the latest increase would make life harder for borrowers.

‘We have been helping customers understand the changing rate environment and consider what it means for them, and we will continue to be there for them,’ he said.

The Commonwealth Bank has become the first of Australia's big four banks to raise variable mortgage rates to match the latest Reserve Bank increase (pictured is a Sydney branch)

The Commonwealth Bank has become the first of Australia’s big four banks to raise variable mortgage rates to match the latest Reserve Bank increase (pictured is a Sydney branch)

The latest increase will see a Commonwealth Bank borrower with an average $600,000 mortgage owe an extra $169 a month in mortgage repayments, as they rose to $2,827 from $2,658.

That’s based on a popular CBA variable rate rising to 3.89 per cent, up 0.5 percentage points from 3.39 per cent for those with a 20 per cent deposit paying off principal and interest. 

RateCity research director Sally Tindall said the delay in announcing mortgage rate rises was bad news for savers

RateCity research director Sally Tindall said the delay in announcing mortgage rate rises was bad news for savers

The changes will also see the Commonwealth Bank’s lowest variable rate rise to a three-year high of 3.79 per cent from 3.29 per cent.

ANZ’s lowest rate is rising to 3.69 per cent from 3.19 per cent. 

Westpac’s lowest rate is rising to 3.64 per cent from 3.14 per cent.

Surprisingly, CBA is cutting its four-year fixed rate by a massive 1.6 percentage points to 4.99 per cent.

While CBA was the first of the big four banks to raise its variable mortgage rates to reflect the latest Reserve Bank increase, Macquarie Bank on Tuesday was the first major lender to react to the official cash rate change.

ANZ’s group executive of retail banking Maile Carnegie also acknowledged cost of living pressures from higher rates.

ANZ's group executive of retail banking Maile Carnegie also acknowledged cost of living pressures from higher rates

ANZ’s group executive of retail banking Maile Carnegie also acknowledged cost of living pressures from higher rates

‘For our home loan customers, we know the cost-of-living pressures will impact some of them more than others, so we have a number of support options available to help customers understand how these changes will affect them and what they can do about it,’ she said.

With the other rate rises this year, the big four banks have been quick to announce their variable rate increases, but they have been slower to react in August.

RateCity research director Sally Tindall said the delay in announcing mortgage rate rises was bad news for savers.  

‘The delay could be a worrying sign for savers,’ she said.

‘It’s possible the banks are still mulling over whether they will pass on the full hike to all their savings customers.’

CBA's group executive of retail banking Angus Sullivan acknowledged the latest increase would make life harder for borrowers.

CBA’s group executive of retail banking Angus Sullivan acknowledged the latest increase would make life harder for borrowers.

The Commonwealth Bank is increasing its NetBank Saver rate by 0.5 percentage points to 1.8 per cent, which reverts back to 0.85 per cent after five months.

‘We want to support our customers where we can, and that includes increasing select deposit rates so they can achieve a better return on their savings and manage any pressures to their family budget associated with cost of living,’ Mr Sullivan said.

But CBA’s GoalSaver account is staying at 1.25 per cent while Youthsaver, for those aged 14 to 17, stays at 1.45 per cent.

Ms Tindall noted that back in November 2010 – the latest time the RBA had raised rates before 2022 – three of the big four banks had waited eight to 10 days to announce rate increases.

The Reserve Bank’s May, June, July and August rate rises, adding up to 1.75 percentage points, have marked the steepest increase in the cash rate since 1994.

The cash rate has now increased by 0.5 percentage points for three straight months for the first time since the RBA began publishing a target cash rate in 1990.

The Reserve Bank's May, June, July and August rate rises, adding up to 1.75 percentage points, have marked the steepest increase in the cash rate since 1994 (pictured is governor Philip Lowe)

The Reserve Bank’s May, June, July and August rate rises, adding up to 1.75 percentage points, have marked the steepest increase in the cash rate since 1994 (pictured is governor Philip Lowe)

All the big four banks are expecting another 50 basis point increase in September, that would take the RBA cash rate to a seven-year high of 2.35 per cent. 

The Commonwealth Bank is expecting the cash rate to peak at 2.6 per cent in November during this monetary policy tightening cycle.

Reserve Bank of Australia governor Philip Lowe has indicated he regarded a 2.5 per cent cash rate the neutral range. 

But ANZ is expecting the cash rate to hit a 10-year high of 3.35 per cent by November while Westpac has that level being reached in February 2023.

NAB is forecasting a 2.85 per cent cash rate by November. 

What a 0.5 percentage point August rate rise means for you

$500,000: Up $141 from $2,215 to $2,356

$600,000: Up $169 from $2,658 to $2,827

$700,000: Up $197 from $3,101 to $3,298

$800,000: Up $225 from $3,544 to $3,769

$900,000: Up $253 from $3,987 to $4,240

$1,000,000: Up $281 from $4,430 to $4,711

Increases based on Reserve Bank cash rate rising from 1.35 per cent to 1.85 per cent taking popular Commonwealth Bank variable rate from 3.39 per cent to 3.89 per cent

 

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