Big Four banks make major fixed interest rate hikes ahead of looming RBA decision

A cartoon house on fire.

Buyers, brace yourselves. Commonwealth Bank, Westpac, NAB, and ANZ have all sharply escalated their fixed rate home loan offers in the last two weeks alone, suggesting the big banks expect a significant move from the Reserve Bank of Australia (RBA) this July. 

The adjustments affect both owner-occupier and investment standard fixed home loans for all four banks, with CommBank lifting interest rates by an eye-watering and virtually unheard of 140 basis points on all fixed terms. Meanwhile, ANZ and Westpac moved all terms by 90 bp and 50 bp respectively, and NAB announced 80-110 bp rises for terms on its Tailored Home Loan.

The table below shows the new interest rates for owner-occupiers making principal & interest repayments on standard fixed rate home loans with an LVR < 80%.

New fixed interest rates for Commonwealth Bank, Westpac, and ANZ standard home loans - 1 July 2022

1-year5.14% p.a. (5.44% p.a. comparison rate*)
4.69% p.a. (3.84% p.a. comparison rate*)
4.79% p.a. (5.35% p.a. comparison rate*)
4.39% p.a. (5.37% p.a. comparison rate*)
2-year5.94% p.a. (5.57% p.a. comparison rate*)5.49% p.a. (4.07% p.a. comparison rate*)5.69% p.a. (5.48% p.a. comparison rate*)5.09% p.a. (5.42% p.a. comparison rate*)
3-year6.54% p.a. (5.80% p.a. comparison rate*)5.89% p.a. (4.32% p.a. comparison rate*)5.89% p.a. (5.57% p.a. comparison rate*)5.49% p.a. (5.51% p.a. comparison rate*)
4-year6.74% p.a. (5.97% p.a. comparison rate*)5.99% p.a. (4.53% p.a. comparison rate*)6.29% p.a. (5.77% p.a. comparison rate*)5.59% p.a. (5.56% p.a. comparison rate*)
5-year6.84% p.a. (6.12% p.a. comparison rate*)6.09% p.a. (4.74% p.a. comparison rate*)6.39% p.a. (5.89% p.a. comparison rate*)5.69% p.a. (5.62% p.a. comparison rate*)

Changes to interest rates reshuffle the pecking order of the Big Four, with Westpac’s fixed rate home loan terms now showing 0.85% cheaper than CommBank’s.

Big Four fixed rate home loans comparison (OO, P&I) - 1 July 2022

BankOffer2-year rate5-year rate
WestpacFixed Options5.09% p.a. (5.42% p.a. comparison rate*)5.69% p.a. (5.62% p.a. comparison rate*)
ANZFixed Rate5.49% p.a. (4.07% p.a. comparison rate*)6.09% p.a. (4.74% p.a. comparison rate*)
NABTailored Home Loan5.69% p.a. (5.48% p.a. comparison rate*)6.39% p.a. (5.89% p.a. comparison rate*)
CBAFixed Rate5.94% p.a. (5.57% p.a. comparison rate*)6.84% p.a. (6.12% p.a. comparison rate*)

CommBank paired its massive fixed rate hike with a minor 15 bp variable rate cut to some of its Extra Home Loan offers (<70% and 70-80% LVR tiers), suggesting they’re still hoping to remain attractive to customers for their variable home loans.

However, variable rate home loans on the whole have been rising in tandem with the official cash rate. With another 50 bp cash rate bump expected in July, the cost of housing finance is poised to have surged more than 1% in the last two months. 

“For every percentage point increase in interest rates, that will mean more and more people will experience financial stress,” explained Financial Counselling Australia representative Fiona Guthrie in a comment to the ABC. “And the larger the group of people, the bigger that reverberates through the whole of the economy.”

Plugging a similar increase into our rate change calculator shows just how much these latest hikes can affect monthly repayments, upticking by $200 or more.

Loan details

Rate change

Repayment change if rates go up

Unless property prices see some meaningful falls, many first home buyers may now find their borrowing power significantly reduced. Those hoping to break in – and stay in – will therefore need to be on the lookout for ultra competitive rates.

What do rate hikes mean for the economy and property market?

Collage of a man balancing along a crack on a blue field.

Since March, interest rates from the Big Four have been steadily climbing in both anticipation and response to the RBA. Back then, 1-year terms with CBA sat at just 2.94% p.a. (4.54% p.a. comparison rate*) – 2.2% cheaper than today. Now, fixed rates have now been pushed in excess of pre-pandemic levels to heights unseen since 2015.

Variable rate home loans have similarly skyrocketed after experiencing a welcome reprieve of cuts in the beginning of the year. Banks typically lowered variable interest rates to entice customers put off by fixed rises, but with both categories surging, borrowers may feel like they have no good options left.

“This is quite unusual, what’s going on at the moment,” explains Mozo expert spokesperson Peter Marshall. “The Reserve Bank had previously been telling people rates wouldn’t go up until 2024, but all of a sudden they’re implementing a particularly steep round of rate hikes. So it is taking a lot of people – including the big banks – by surprise.”

With the Big Four responding to the RBA’s aggressive mindset, Marshall says consumers should expect them to go quite hard, with further rate hikes looming in the months ahead.

“Everyone’s anticipating rates will go as high as 6% to 7%, and it’s certainly not out of the question,” he explains. “Someone with savings and no loan might be cheering that idea, but there’s plenty of risk in the world economy at the moment, so I don’t think the Reserve Bank’s path forward is as clear as they think or say it is.”

“If they hike rates too fast, they may well just cause everyone to close their wallets, stop spending, and crush the housing market.”

RELATED: What is monetary policy, and how can it help you?

Property price drops would certainly be welcome news to both the RBA and hopeful buyers, but homeowners may be facing a significant loss of equity if rates fly too high. A loss like this would ultimately make refinancing to avoid rate hikes that much harder. 

“Someone who bought a year ago may find their borrowing power has reduced already,” warns Marshall. “So refinancing may not be an option for everyone.”

How can mortgage borrowers best handle the latest round of rate hikes?

Collage of a personal comparing different colour bars on their smartphone.

While it’s easy to get swept up in the doom and gloom, there are still strategies buyers can take to manage the cost of financing a home.

“If you’ve got an offset account, put in every little bit of money that you’ve got,” advises Marshall. “It’s absolutely the best way to save on interest.”

For those who don’t have offset accounts available to them, Marshall recommends they still consider refinancing. 

“If you can refinance, definitely have a look around, check your current rate, and see if you can get something better,” Marshall encourages. “There are still some okay fixed rates around, but you have to look at smaller lenders. Search for the little guys who still have decent options available.”

Yet another victory for David against Goliath.

Stay on top of rate changes with our new RBA rate tracker. For more market insights, subscribe to our weekly Moneyzone newsletter.

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