CommBank asks for a rate rise in June; Westpac increases fixed rates

CommBank economists expect the Reserve Bank of Australia to increase cash rates by June of next Year.

Gareth Aird from CommBank, the Australian head of economists, stated that the June forecast was based on the prediction of where inflation is going over the first quarter in 2022.

“We are very comfortable with our expectation that the Q1 22 underlying inflation data will be a lot stronger than the RBA’s forecast,” Mr Aird said.

Philip Lowe, RBA Governor, stated that in his recent appearance before the House of Representatives Standing Committee on Economics, the central bank board was still watching where wage growth and inflation would occur before moving the needle on cash rate.

“We are prepared to take the time, particularly given our inflation history and the prospect of low unemployment,” Dr Lowe said.

Mr Aird said Dr Lowe’s statement seemed to hint that the RBA is willing to consider inflation to be in sustainably within the target range if the next two inflation prints are in line with their forecast.

But given CommBank’s forecast on inflation, Mr Aird said the RBA could potentially deliver a 15bps increase in cash rate in June, bringing it to 0.25%.

The cash rate will remain at 1% by 2022

“Interest rate increases will generate changes in behaviour, which in turn will impact economic outcomes,” Mr Aird said.

“For context, we estimate there are over one million home borrowers who have never experienced an increase in mortgage rates.”

A second increase is anticipated in 2023. This would increase the cash rates to 1.25 percent in the third quarter.

“The RBA will need to assess the impact of rate hikes on the economy, particular the household sector and the housing market, as they move through the tightening cycle,” Mr Aird said.

“This means the central bank is likely to be patient and a gradual and shallow rate hike trajectory is our base case.”

Westpac was also one of the major banks that adjusted their projections of a cash rate hike — it expects for an August rate hike, which would bring the cash rate target to 0.2%.

These are the biggest movements in home loans rates seen by Australian banks and lenders ahead of these forecasts.

Westpac

Credit Union SA

Citi

BankSA

Suncorp Bank

86 400

TicToc

BankVic

Gateway Bank

ANZ to end Breakfree Package

In a bid to offer “simpler” home loans to its clients, ANZ announced that it will remove its Breakfree package from its mortgage line-up.

Mark Hand, a representative of ANZ Group in Australia for retail and corporate stated that the Breakfree Package will not be offered until March. When bundled with other financial products, it offers a discount for home loans.

“We understand customers want more choice today about how they structure their home loans and our new approach provides that while retaining a discounted interest rate and no annual package fee,” he said.

“This is really good news for our home loan customers who only want to pay for the products and features they value and choose to use.”

Existing Breakfree customers who convert to the simplified home loan proposal starting September will still enjoy their current interest rate discounts

Under the new “simplified” approach to home loans, clients will not be charged to pay for the following:

• An approval fee for a loan
• Administrative fees for loans
• Valuation administration fees
• For progress, payment fees
• Repayment fees for loan renegotiation
• Guarantor administration fees

After the ceremony, the announcement was made. Australian Securities and Investments Corporation (ASIC) found that ANZ failed to provide promised benefitsBreakfree products

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