Yahoo Finance Major bank hikes rates, makes big RBA prediction
One of Australia’s biggest banks has upped its four and five-year fixed mortgage rates for owner-occupiers only, while property investors won’t cop a rise at all.
However, the big four bank also shaved its two year fixed rate by 0.10 per cent, taking it down to 1.94 per cent for owner-occupiers.
Investor two-year fixed rates were also cut by 0.15 per cent.
For the first time, ANZ now has an advertised mortgage rate of under 2 per cent. By contrast, CBA, Westpac and NAB have had rates under 2 per cent since November 2020.
RateCity.com.au said analysis of its database shows the majority of three, four and five-year rate changes in the last month have been hikes.
However, when it comes to one and two-year fixed rates, there are still more lenders cutting than hiking.
The exception is Westpac, which increased two-year fixed rates earlier this week.
RateCity research director, Sally Tindall, said ANZ was the only big bank that didn’t offer a rate below two per cent for the last seven months.
“The trimming of ANZ’s two-year fixed rate is likely to be about winning new business,” she said.
“While the bank shaved two-year rates, it has made sizeable hikes to four and five-year fixed rates for owner-occupiers in response to the expected rise in the cost of funding over the next few years.”
And, rates are expected to go up across the board, Tindall said, as the RBA’s term funding facility is about to expire.
“When the RBA’s term funding facility wraps up at the end of this month banks will have to find cheap money elsewhere,” she said.
“We expect to see more fixed rate hikes following this, particularly for terms of three years and above.”
How do the big banks compare?
The changes this week from ANZ and Westpac have brought all the big banks closer together in terms of the range of what they’re offering.
“For months, Westpac had an extremely competitive two-year rate that would have been squeezing its profit margins, while ANZ’s two-year rate was noticeably higher than the other big banks,” Tindall said.
“As a result of today’s cut, ANZ is now back in the game when it comes to two-year fixed rates.”
ANZ’s RBA prediction
ANZ economists also said the Reserve Bank of Australia (RBA) may increase interest rates a whole year sooner than predicted.
The RBA has been adamant it will not be looking to hike rates until at least 2024 when it predicts wages and inflation will be in line with its goals.
However, ANZ economists think the Aussie economy will hit those goals sooner, expecting the central bank to increase interest rates in 2023 instead.
“We have the RBA tightening in two steps in [the second half of] 2023, to take the cash rate to 0.5 per cent by end-2023, as the conditions it has set out for such a move are met,” they said.
The current cash rate is 0.1 per cent, and the RBA has said this won’t increase until inflation is sustained above 2 per cent and wages growth is above 3 per cent.
“The tighter labour market will drive wages growth and ultimately inflation higher,” the economists said.
“We expect annual growth in the wage price index to accelerate to 3 per cent in [the second half of] 2022, and hold a little above 3 per cent through 2023 even as the opening of borders boosts the supply of labour.”
Follow Yahoo Finance on Facebook, LinkedIn, Instagram and Twitter, and subscribe to the free Fully Briefed daily newsletter.
