NAB chief economist Alan Oster's chilling warning for mortgage-holders in Australia - but there's a ray of hope at the end of next year

NAB has increased its fixed term rates just hours after its chief economist issued a chilling warning of another interest rate hike in 2024.

Alan Oster said he expected rates to peak early in the new year, before falling slowly from November 2024.

'We have one more rate rise ... for early next year,' Alan Oster told a NAB podcast after the bank released updated economic forecasts on Tuesday which showed the cash rate rising to 4.6 per cent in February.

'I don't think the Reserve Bank is itching to raise rates, but on the balance of probabilities they will probably do one ... It means rates will stay higher for longer - we've moved the rate cuts from August out to November.'

Mr Oster added that when the RBA did move to ease monetary policy, it would do so slowly.

'Let's say 25 basis points a quarter which means we don't get back to out neutral rate of around 3 per cent until early 2026.'

NAB joins Westpac, Commonwealth Bank and a growing number of lenders to hike fixed rates as mortgagees walk away from the ultra-competitive approach taken during the pandemic to attract customers.

Results from both banks earlier this month showed profits sank in the September quarter, with analysts warning of further pressure in the years ahead amid growing competition in home lending reduced mortgage margins.

On Friday, NAB announced it would increase its fixed-rate mortgages for both owner-occupiers and investors, with some rates rising by up to 0.25 percentage points.

Westpac will hiked its fixed rate by up to 0.2 percentage points while also increasing the rate on its basic variable mortgage by 0.1 percentage points.

The hikes to the fixed rates will apply to lenders paying both principal and interest, and interest only. It will not affect customers paying existing fixed-rate loans, only new ones.

All of the big four banks, bar ANZ, have increased some of their fixed mortgage rates following the Reserve Bank's decision to hike the cash rate to 4.35 per cent on November 7.

Last week, the nation's largest retail lender, Commonwealth Bank, increased the rate on its three-year fixed mortgage for investors and owner-occupiers by 0.3 percentage points, effective November 17.

Traditionally, fixed interest rates form only a small part of Australia's home loan market, with the vast majority of Australian borrowers holding variable rate loans.

However, during the pandemic, fixed lending rates plunged to less than 2 per cent a year for many customers, causing fixed lending to soar.

Competition between the banks for fixed-rate lending has fallen significantly.

While a record 46 per cent of new and refinanced loans purchased in 2021 were fixed, this figure has plunged to just 4 per cent, according to the Australian Bureau of Statistics.

RateCity research director Sally Tindall said the moves by Westpac and NAB reflected the squeeze on bank's profit margins in their home loan book.

'The home loan market has been flooded with hikes over the last month, as banks move their fixed rates to higher ground,' Ms Tindall said.

'With another cash rate hike potentially still on the cards, and a growing expectation that the cost of funding will remain high well into 2024, banks are racing each other to increase fixed rates.'

Ms Tindall said in the last month alone, 60 lenders had hiked at least one of their fixed rates.

'This is likely to be a safety-first strategy from the banks. The last thing they want is to get caught out underpricing their fixed-rate loans,' she said.