CBA and ANZ have this afternoon announced they will pass on the RBA’s 0.25 cash rate hike in full to their variable borrowers.
The banks’ tardy announcements follow from Westpac’s and NAB’s statements earlier today, with all four confirming variable mortgage rates will increase next Friday, 13 November.
When they take effect, Westpac will continue to offer the lowest advertised variable rate out of the majors at 6.49%.
Big four banks’ lowest rates, effective 13 November | |||
|---|---|---|---|
Old rate from | New rate from | Change | |
CBA | 6.34% | 6.59% | +0.25 |
Westpac | 6.24% | 6.49% | +0.25 |
NAB | 6.29% - 7.04% | 6.54% - 7.29% | +0.25 |
ANZ | 6.50% | 6.75% | +0.25 |
Source: Canstar. Rates are for owner-occupiers paying principal & interest. LVR requirements apply.
Here’s what happens now for big four home loan customers
While the big four banks will start charging customers the higher mortgage rate in nine days-time, the banks give a minimum number of days notice before automatically increasing customer repayments:
- CBA: a minimum of 20 days’ notice
- Westpac, NAB, and ANZ: a minimum of 30 days’ notice
However, in reality, the lead time is typically two to three months before the extra money comes out of their account.
This is to give customers time to find the extra cash or contact their bank if they need hardship assistance.
Repayment spike will test established borrowers
This latest cash rate hike piles even further pressure on overstretched borrowers, particularly those who took out a mortgage when rates were at record lows, and the banks were green-lighting burgeoning home loan applications.
The seemingly prudent 3 percentage point stress test has been no match for the 4.75 percentage points of rate hikes we’ve seen since.
Canstar modelling shows that a typical borrower taking on a $600,000, 30-year mortgage five years ago would have started out paying a relatively modest $2,399 per month on their repayments.
Fast forward to today, once this latest hike kicks in, and they’ll need to find $4,056. That’s $1,657 more than their initial monthly cost.
Change in repayments: $600k borrower who took out their loan 5 yrs ago | ||
|---|---|---|
| Rate | Monthly repayments |
At start of loan | 2.59% | $2,399 |
Today | 7.34% | $4,056 |
Difference | +4.75% | +$1,657 (+69%) |
Source: Canstar. Notes: based on an owner-occupier paying principal and interest taking out an average variable rate 30 year loan in December 2021. Assumes rate changes in line with RBA movements. Does not factor in extra repayments.
How do the majors’ new rates compare to the lowest rate lenders?
While the big four banks will soon be offering advertised variable rates from 6.49% all the way up to 8.24%, Canstar estimates there will still be at least a couple of lenders offering rates under 6.20%.
Estimated owner-occupier rates following November RBA hike:
- 6.74% would be the average owner-occupier variable rate.
- Under 6.50% would be a competitive owner-occupier variable rate, on offer from an estimated 40+ lenders.
- Under 6.20% is likely to be one of the lowest variable rates.
What about for savers?
ANZ has announced it will increase the bonus rate on its Plus Growth Saver by 0.25, taking the maximum ongoing rate to 5.60% from next Friday. The base rate on this account, however, is set to stay at just 0.10%.
The announcement is similar to Westpac’s earlier today, which outlined a 0.25 hike to the maximum rate on its bonus saver accounts, but no increase to the base rates for customers who don’t meet the monthly criteria.
CBA and NAB did not announce any savings rate changes today.
One of the most frustrating plays in the banking handbook
Canstar’s Data Insights Director, Sally Tindall, says, “Predictable and painful – the big four banks have now confirmed their mortgage rates are on the rise, once again, by the full 0.25.”
“While the big banks will start charging their variable home loan customers higher rates from next Friday, borrowers should know it can take up to three months for the extra money to start coming out of your bank account.
“The banks do this to give customers ample time to raise the red flag, and for some, this rate hike could be the one that pushes them to do this.
“Canstar modelling shows for someone who took out a pretty typical $600,000 mortgage five years ago, their minimum repayments would have been a reasonably comfortable $2,399 a month. Fast forward to today and that same mortgage will soon be costing $4,056 a month. That’s an extra $1,650 they have to pay every single month compared to the start of the loan.
“The serviceability buffers from the era of record-low rates have been well and truly shredded. The APRA buffer was increased from 2.5 to 3 percentage points back in November 2021. But even the more prudent setting has been blown out of the water with the 4.75 percentage points of RBA hikes in the last four-and-a-half years.
“In a market where loyalty rarely pays, the best defence is voting with your feet. While the big four have all confirmed their rates are going up by 0.25, we expect there will be at least a couple of lenders offering rates under 6.20 per cent once this November hike washes through.
“For savers, the news is unfortunately coming through on a drip-feed.
“Westpac and ANZ have confirmed select savings rates are getting a boost, but these rate rises are contingent on customers meeting the banks’ terms and conditions. Meanwhile, CBA and NAB haven't even bothered to announce savings relief today.
“It’s one of the most frustrating plays in the banking handbook: rapid, universal hikes for borrowers, conditional ones for select savers.”
