Major lenders hike interest rates in the lead up to Christmas

Mortgage holders could receive an unwanted Christmas gift as banks hike interest rates in the lead up to Christmas.

Just a week before Christmas, ING has hiked its fixed interest rate offering by as much as 0.35 percentage points.

Fixed interest rates now start at 5.39 per cent and could be as high as 5.94 per cent depending on the borrower’s loan to valuation ratio.

The increase to these fixed interest rates is effective for fixed rate loans that settle from Friday.

In total, 12 lenders have jacked up at least one fixed rate in the past week including Westpac St George, Bank of Melbourne, BankSA, HSBC, Suncorp and Australian Mutual Bank.

Friday’s move by ING is in line with Westpac who last week hiked its own fixed interest rates by 0.35 percentage points.

Canstar data insights director Sally Tindall said on Tuesday there has been a shift in market expectations.

“There was a run on fixed rate hikes last week with 12 lenders hiking 298 fixed rates in the space of seven days, including big four bank Westpac,” she said.

“Additionally, NAB has hiked fixed rates ... by up to 20 percentage points.”

“As a result, the number of lenders offering a fixed rate under 5 per cent is starting to slip, which from last count was down from 43 a month ago to just 29 lenders.”

Banks forecast interest rate hikes

Big banks and lenders are starting to raise the rates of their mortgage offering at the same time as the market appears to predict interest rate hikes.

The Reserve Bank of Australia (RBA) will meet again on the first Monday and Tuesday in February with economists split on whether interest rates will be hiked.

Six weeks ago, markets were all but calling for interest rate cuts in the new year, but stubbornly high inflation, currently at 3.8 per cent, and a stronger than expected economy has seen money markets flip.

NED-9108-Monthly-Inflation-Indicator

There are now 0.40 percentage points of interest rate hikes forecasted in 2026, with the timing of when interest rates will rise still up for debate.

Commonwealth Bank has become the latest major to suggest rates need to rise in the new year after saying the economy is stronger than forecasted.

They say a combination of households spending more, wages rising and big business investing in growth areas including data centres and renewable energy has all led to the national economy getting close to “its capacity constraint”.

This usually leads to price increases.

“The economy has picked up more momentum than expected, and that strength is keeping inflation from easing. A small rate increase in February would guide inflation back toward the RBA’s target range of 2-3 per cent,” said Commonwealth Bank head of Australian economics Belinda Allen.

All of Australia’s ‘big four’ banks have dismissed the possibility of a rate cut in 2026, with two of them forecasting at least one increase early in the year.

NAB has joined Commonwealth Bank with expectations interest rates will rise after the RBA’s first meeting in the new year.

“There is a very strong risk that the RBA would move first because the economy is at its speed limit,” said Ken Crompton, head of rates strategy at National Australia Bank.