Fixed rates are rising, as CommBank predicts a cash rate boost in June.

Hold on to your hats, for things are about to become bumpy. Economists at Australia's largest bank believe the Reserve Bank will hike the official cash rate as soon as June, and fixed interest rates have already risen significantly.

The economists at Commonwealth Bank (CBA) have pushed back their anticipated RBA cash rate hike from August to June, making it the earliest projection among the major four banks.

We’ll go into more depth about why CBA has moved its forecast ahead below, but first, a little more concrete: fixed rates have been going up in recent months.

Increases in fixed rates

For example, in November, a two-year fixed rate with one lender for a $700,000 loan with an 80 percent loan-to-value ratio was 1.84 percent.

Since then, the rate has risen to 3.04 percent, a startling increase.

While not every lender has increased fixed rates as dramatically as others, we are witnessing an increase in fixed rates across the board.

So, if you’ve been debating whether or not to adjust your rate recently, you’ll want to contact us as soon as possible.

Because, while most lenders have lately decreased their variable rates to compensate, now that the cash rate is expected to rise in the middle of the year, you can expect variable rates to rise in lockstep with the cash rate.

So, why has CBA pushed its forecast out to June?

So, let’s get back to CBA’s June cash-rate hike forecast and why they’ve moved it up from August.

In a nutshell, CBA senior economist Gareth Aird believes inflation will be far higher than the RBA predicts.

As a result, Mr. Aird anticipates a 0.25 percent increase in the cash rate at the June board meeting (it is presently at a record-low 0.1 percent).

“We are extremely confident that the underlying inflation statistics for the first quarter of 2022 will be much greater than the RBA’s forecast,” Mr. Aird says.

And here’s the thing: it won’t be the RBA’s only rate hike in the next 12 months, according to CBA.

Mr. Aird anticipates three further rate hikes in 2022, bringing the cash rate to 1%, followed by a move to 1.25 percent in early 2023.

That’s a total of five rate hikes in a year!

Get in contact with us right away to discuss your alternatives.

More than a million mortgage holders, believe it or not, have never had their interest rates raised (the last RBA cash rate hike was in November 2010).

If the CBA’s estimate of five rate hikes over the next 12 months comes true, some households will be in for a rocky ride, with hundreds of dollars in extra monthly mortgage repayments.

So get in touch with us right away if you want to take action before the RBA raises the official cash rate. We’d be delighted to sit down with you and walk you through your options ahead of time.

To learn more, contact Premium Finance Group Australia at (07) 4720 8888 or email us at finance@pfga.com.au

 

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