Interest rates take off as bank warns of big hikes ahead
Suncorp has lifted its cheapest variable home loan rate above 2 per cent as other major lenders have cut theirs in a clear sign the lenders are positioning for turbulent times ahead.
Brisbane house prices have recovered all of the losses recorded in 2022 (file photo)
Suncorp’s lowest variable is now 2.02 per cent – up .08 per cent – and it is among about 17 lenders who have lifted their variable rate for new customers in recent weeks. Suncorp’s rate is still below some of the major lenders.
The increase is despite the Reserve Bank maintaining its existing cash rate. However, lenders have faced increases in the cost of funds which is forcing the move.
The big lenders, however, have aggressively sought market share by decreasing variable loans. Westpac, ANZ and NAB trimmed their rates last month and the CBA reduced its lowest variable rate to 2.19 per cent last week.
But the moves are aimed at grabbing market share ahead of expected rate rises later this year.
The critical issue is that many Australians are sitting on savings accrued during last year’s lockdowns and many are two years ahead of their mortgage repayments, which means they have the ability to cope with tougher times.
Comparison website Mozo found last week that 62 of the 90 lenders it tracked had increased some or all of their fixed rates since the start of February – some had hiked several times.
It found 17 lenders had increased the variable interest they charged new customers.
The ANZ also warned this morning that the RBA will have to hike rate to take heat out of the economy into what is known as the “restrictive” phase.
It said this would lift the RBA’s benchmark cash rates to 3 per cent or higher. If that were to occur, many of the variable mortgage rates would be above 5 per cent.
However, financial markets are expecting the cash rate to rise to 2.5 per cent and many economists don’t expect it to even get that high.
The Commonwealth Bank said yesterday that it was possible that the RBA could move into a restrictive phase, but it did not consider it the most likely outcome.
The ANZ has also trimmed its expectations for the economy this year with growth now at 4.2 per cent with strong household finances and wage growth the key elements.
About two-thirds of borrowers are on variable rates and the Commonwealth Bank said fixed rate loans totalling about $500 billion were due to be refinanced in the next two years.
Banks are also offering thousands of dollars in cashbacks for people refinancing their loans, but many experts warn against this because the cashback ends up being a poor compensation for higher interest rates.
