The National Australia Bank (NAB) has raised its fixed interest rates on home loans, becoming the first among the big four banks to do so.
This move comes ahead of the Reserve Bank of Australia's (RBA) impending meeting and signals that banks anticipate another potential rise in the cash rate.
The hike arrives amid renewed concerns over inflation rates, higher oil prices and a surge in government yields.
Just two weeks ago, NAB and other major banks had been lowering one and three-year fixed rates for both homeowners and investors.
Cash rate peak unclear
Economists had initially speculated that the cash rate, currently at 4.1%, was close to its peak, with some forecasts even suggesting rate cuts as early as next year. But the current fixed-rate mortgages, ranging between 6.34% and 6.59% for one year and 6.24% and 6.84% for two years, suggest higher margins for banks if the cash rate starts to decrease.
AMP Capital chief economist Shane Oliver told the media recently: “Signs of rising wages growth in enterprise bargaining agreements and still high inflation mean that the risk of another rate hike is high."
Oliver suggested that any further rate hike was likely to occur in November or December, following the next release of the Australian Bureau of Statistics (ABS) data on inflation and wages.
NAB's latest announcement reverses this trend. The bank is increasing its two-year owner-occupier fixed rates by 15 basis points for customers paying principal and interest.
Moreover, four-year rates have risen by 0.10% for the same type of borrowers, and some investor fixed rates have seen an uptick of up to 0.05 percentage points. The bank can no longer boast the lowest two-year fixed rate out of the big four banks – that honour now goes to ANZ.
The development comes as global economic indicators suggest rising pressures. Oil prices have reached a 2023 high of US$97 per barrel, and the annual inflation rate escalated to 5.2% from 4.9% in July.
These factors, coupled with a weakening Australian dollar, will likely influence the RBA's decision-making in its upcoming meeting.
Markets are pricing in a 40% chance of a 25 basis point increase in the cash rate by November, setting an ominous tone for both economists and traders.