Borrowers Face Higher Repayments
Australia’s big four banks—NAB, Westpac, CBA, and ANZ—will pass on the latest 25 basis point interest rate hike. Borrowers won’t see any relief, as monthly repayments will rise again.
RBA Surprises Market With Rate Increase
On May 2, the Reserve Bank of Australia (RBA) raised the cash rate from 3.6% to 3.85%. This move came as a surprise to many analysts. The increase aims to combat inflation, which currently sits at 7%.
Although the RBA paused rate hikes last month, it warned that further increases were likely if inflation remained high.
“Inflation in Australia has reached its highest point and stands at 7%, which is still unacceptably high. It will take some time before it returns to the target range.” — Governor Philip Lowe
This marks the 11th rate hike in 12 months. For a $600,000 loan, monthly repayments will rise by $96. Since May 2022, repayments have increased by $1,351 due to the cumulative effect of these hikes.
Understanding Accumulation Funds
Accumulation funds calculate your retirement savings based on contributions and investment returns. Both you and your employer contribute to the fund. You can choose how to invest—whether in shares, bonds, or property—depending on your goals and risk tolerance.
These funds fluctuate with the market. Strong performance can grow your savings, but poor returns may reduce them. While they offer flexibility and potential for growth, they also carry higher risk.
How Banks Are Responding
NAB Takes the Lead
National Australia Bank was the first to raise rates for both mortgage and savings customers. It increased its savings rate from 4.25% to 4.5%, offering better returns to savers.
Other Banks Follow
Westpac, ANZ, and CBA also announced mortgage rate increases. However, they raised savings rates only for select accounts.
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Westpac: Variable rate rises from 5.24% to 5.49% (effective May 16)
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ANZ: Variable rate increases from 5.54% to 5.79% (effective May 12)
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NAB: Introductory variable rate goes from 5.64% to 5.89% (effective May 12)
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CBA: Variable rates rise by 0.25% on May 12
CBA Offers Fixed Rate Relief
CBA also reduced its three-year fixed home loan rate by 0.40%. The new rate is 5.59%, giving borrowers a more affordable fixed-rate option.
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