Westpac and CBA hike fixed rates in warning to borrowers

Many economists expect RBA governor Michele Bullock to announce another cash rate hike in May. Picture: Martin Ollman

Australian borrowers have been hit with another brutal blow, with two of the big four banks announcing new hikes on fixed mortgage rates.

It’s a clear warning shot that banks are anticipating another cash rate hike, with fixed rates movements often a strong indicator of which way lenders are betting the cash rate will go.

The Reserve Bank earlier this month announced a 0.25 per cent hike in the cash rate, but numerous lenders are now going further, lifting rates by much higher margins across fixed rates.

Since the RBA move, close to a dozen lenders have already hiked their rates on more than 200 fixed loan products, with the typical hike 0.33 per cent – much higher than the last cash rate increase.

The latest to join the fray are Westpac and Commonwealth Bank, with the former announcing it will increase rates on one-, two- and three-year fixed loan products by 0.3 per cent.

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Buyer demand has remained at the cheaper end of the market, but expectations of more rate hikes are weighing in on the higher end of the market. Picture: Rohan Kelly

Meanwhile, Commonwealth Bank announced its fixed rates will increase by 0.25 per cent.

It comes as new ABS data released Wednesday showed trimmed mean inflation over the 12 months to January was 3.4 per cent, up from 3.3 per cent over the 12 months to December.

Trimmed mean inflation is one of the main measures the RBA looks at to determine monetary policy.

VanEck senior portfolio manager Cameron McCormack said the latest inflation figures above the RBA 2-3 per cent target range will keep a May rate hike on the cards.

“With inflation remaining outside the target band, and elevated across many components, a May rise is firmly in play,” he said.

CBA’s latest fixed rate hike is the second time in six weeks that CBA has increased fixed rates. As a result, every one of its fixed loan products now has a six in front of it, according to analysis by Canstar.

Just four months ago CBA was offering a fixed rate with a four in front.

Westpac has increased its rates on four- and five-year fixed periods by 0.2 per cent. The bank’s one-, two and three-year fixed rates still start with a five.

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Canstar.com.au data insights director Sally Tindall said the latest round of fixed rate increases from Australia’s two biggest banks were in response to elevated fixed rate funding costs, but also an expectation this is not the end of the cash rate hikes.

“Competition in the fixed rate space, and the near-anaemic appetite from customers to lock in their home loan rate is also likely to have played a role,” she said.

“This latest round of fixed rate hikes isn’t happening in a vacuum. Since the Reserve Bank lifted the cash rate on 3 February, around 60 lenders have hiked at least one of their fixed rates.”

It means new borrowers are now staring down the barrel of higher certainty loans, with fixed rates no longer offering the safety net they once did.

Mortgage brokers say borrowers rushing to lock in rates are finding the deals vanish overnight, replaced by sharper pricing that bakes in expectations of further tightening.

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Major banks have been raising interest rates on a bet that the cash rate will rise.

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Most economists are expecting another cash rate hike from the RBA to occur in May, with the consensus that another increase is needed to rein in stubborn inflation.

Minutes from the RBA last board meeting in early February showed the central bank conceded that it had eased the cash rate too much in 2025.

“The Board considers that inflation is likely to remain above target for some time,” the minutes said.

Expectations of higher loan costs appear to be increasingly guiding the decisions of new home buyers, with agents reporting an air of buyer uncertainty has crept into the property market.

This has been most pronounced in the higher end of the market, where buyers tend to borrow more but also be more discretionary – they’re often upsizers or downsizers who can delay their plans if feeling spooked by interest rate changes.

Canstar’s Sally Tindall said 60 lenders had announced at least one fixed loan product hike since the start of February. Picture: Tim Hunter.

Buyer demand has remained robust for cheaper properties – especially those priced within the cap of the federal government’s First Home Guarantee Scheme.

Ray White NSW head of auctions David McMahon said fears of higher loan costs “appear to be reshaping behaviour” among sellers too.

“Our auctioneers are reporting a higher proportion of properties selling prior to auction, now at 24 per cent, compared to recent months, as vendors show a greater willingness to consider strong pre-auction offers,” he said.