The Commonwealth Bank of Australia CBA has increased its fixed mortgage rates by 1.4 per cent, just days before the next Reserve Bank board meeting.
For one to five years, fixed mortgage rates for owner-occupiers and investors have been pushed higher.
For new customers with a 30 per cent deposit, the bank has cut its lowest variable home loan rate by 0.15 percentage points, down to 2.79 per cent.
Sally Tindall, au research director, said the size of the rate hikes is unlike anything she has seen from the CBA.
She expects that other major banks will lift rates in response.
We haven't seen one-off hikes of this size and scale from the CBA in our records, Ms Tindall said on Thursday.
The bank is responding to rising costs of fixed-rate funding and a market that refuses to believe that the Reserve Bank will stop hiking the cash rate at around 2.50 per cent.
A year ago, CBA offered a fixed rate of less than 2 per cent. She said that the bank's lowest fixed rate is just over 5 per cent, while the majority are well over 6 per cent.
She said it was incredible to see fixed rates move this dramatically in such a short space of time.
Ms Tindall said she expects other major banks to follow CBA's lead.
She said that Westpac and NAB's fixed rates are now a percentage point lower, in many cases.
It's only a matter of time before these banks hike fixed rates again.
While CBA may have turned its back on competition in the fixed rate sector, it has got its eyes squarely focused on reeling in new variable rate customers. The cash rate target will be discussed next week by the RBA board on Tuesday.
The cash rate target was raised earlier this month from 0.35 per cent to 0.85 per cent.
Economists think it will lift the target next week, in a bid to convince the population that it hasn't lost control of inflation.
When the cash rate target was lifted to 0.85 per cent this month, all four major banks lifted their rates in response.
RBA Governor Philip Lowe warned last week that inflation was increasingly coming from Australia.
He said the share of goods and services in the consumer price index CPI basket that were experiencing annual price increases of 3 per cent or more was their highest since 1990.
He said he didn't see a recession in Australia at this stage, because of the strength in the labour market.
The Australian Bureau of Statistics data showed that there were 480,100 job vacancies in May, up 13.8 per cent since February.
In May 2022, the number of job vacancies was 111.1 per cent higher than in February 2020, prior to the start of the epidemic.