Following a reprieve for mortgagees with a cash rate pause in April, the RBA has once more lifted the cash rate by 25 basis points (0.25%) to 3.85%.
The increase in May takes the cash rate to its highest level since May 2012, where at that time it sat at 3.75%.
PropTrack Senior Economist Eleanor Creagh said now the cash rate is sitting at 3.85% after 375 basis points of tightening to date, maximum borrowing capacities have dropped by around 30%.
“While the significant reduction in borrowing capacities and deterioration in affordability caused by interest rate rises implies larger price falls, the downward pressure is being offset,” Ms Creagh said.
“The path for home prices in the months ahead will be influenced by many opposing factors, including the level of supply hitting the market and the trajectory of interest rates.
“Headwinds remain, with the full impact of rate rises already delivered yet to be felt and the possibility of further tightening still in play.”
AMP Chief Economist Shane Oliver said a variable rate borrower with a $600,000 mortgage will see roughly another $99 added to their monthly mortgage payment from today’s RBA hike which will take the total increase in their monthly payments since April to around $1200 a month.
"That’s an extra $14,250 a year which is a massive hit to household spending power," Dr Oliver said.
"Many of those on fixed rates will start to experience that increase this quarter and next. Don’t forget that the RBA estimates that 15% of variable rate borrowers will move into negative cash flow (with after tax income below essential living expenses and mortgage payments) by year end if the cash rate rises to 3.75% and we have now surpassed that."
NAB
The first of the major banks to make a money move following the RBA's May decision was NAB, announcing on Wednesday afternoon its intent to pass on the rate increase in full to both variable home loan and savings account rates.
Increases to both NAB variable rate home loans and savings accounts will take effect from 12 May 2023.
NAB Group Executive Personal Banking Rachel Slade said the decision by the Reserve Bank to pause rates in April gave Australians some breathing room after 10 consecutive rate rises.
“With the cash rate increasing again, there may be some customers who are concerned about their financial position, and we are here to help," Ms Slade said.
ANZ
Two days removed from the RBA's May cash rate decision, ANZ has announced its intent to pass on the 0.25% increase in full to both variable rate home loans and savings accounts.
In similar fashion to NAB, ANZ's home loan increases will take place from 12 May 2023, however savers will reap the rewards a day earlier from 11 May 2023.
ANZ Group Executive Australia Retail Maile Carnegie noted ANZ has a number of tools available to help customers understand these changes and manage their home loans.
"If you are facing difficulty, contact our experienced teams as early as you can to discuss additional personalised support," Ms Carnegie said.
“Competition for customers’ deposits continues to be strong – and we are again increasing the rate on our ANZ Plus Save account, to take it to 4.50% p.a."
Westpac
Following in quick succession from ANZ, Westpac has announced its intent to pass on the cash rate increase in full to both variable rate home loans and savings accounts.
For variable rate mortgagees, the increase will take place from 16 May 2023.
Savers are a key beneficiary of Westpac's decision, with the big four bank increasing savings rates by up to 30 basis points - 5 basis points above the RBA's increase, from 12 May 2023.
Westpac's decision to increase savings account rates sees the bank become the first of the big four to offer a savings account at 5% p.a. for customers aged 18-29 with a Spend&Save account.
Westpac Chief Executive of Consumer and Business Banking Chris de Bruin said we’re increasing our savings rates to help our customers meet their goals.
“We understand cost of living is top of mind for many Australians and to assist our customers manage their money we have several budgeting tools available in the Westpac app and educational resources online through the Master Your Money webpage or via Westpac’s Davidson Institute," Mr de Bruin said.
“We know customers are looking carefully at their budgets as interest rates rise. While many are adjusting to making higher repayments, we understand others may need extra help.
“To assist we’re reaching out to some customers we believe may need additional support, we also encourage any customer doing it tough to give us a call."
CommBank
Three days following the RBA's May decision, CommBank has announced its intent to pass on the 25 basis point increase in full to variable rate home loans and savings accounts.
In similar fashion to NAB and ANZ, CommBank's increase to both home loan and savings rates will take effect from 12 May 2023.
CommBank Group Executive Retail Banking Angus Sullivan said we understand the combination of increasing interest rates and the rising cost of living is creating challenges for some customers, which is why we encourage any customer with concerns to message us in the CommBank app to start a conversation with one of our specialists.
"The sooner that conversation begins, the sooner we can begin to work together to find solutions based on each customer’s individual circumstances," Mr Sullivan said.
“Our comprehensive program of support for our home loan customers includes proactively getting in touch with customers who will be rolling off fixed rate loans, as well as a range of other options to ensure customers experiencing hardship are in the best possible position to manage their finances."
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Buying a home or looking to refinance? The table below features home loans with some of the lowest interest rates on the market for owner occupiers.
First published on May 2023
Image by CBA, ANZ, NAB & Westpac
Denise Raward
Harry O'Sullivan
Harrison Astbury
William Jolly
