The Commonwealth Bank, Australia’s biggest mortgage lender, became the second big bank to raise its standard variable home loan rate for owner occupiers.
The rise, by 0.15 of a percentage point, isn’t as large as Westpac last week when it announced a 0.2 of a percentage point lift to 5.68%, a move it blamed on the need to meet stricter rules on the amount of new capital banks have to hold.
This means that half of all Australians with a home loan will be paying more to buy a home. The two banks together hold a bit more than 50% of the market between them.
And it also means that it is now more likely that the Reserve Bank will cut official cash rates.
The rate rise comes at the same time that price growth in Sydney houses, the hottest property market in Australia, is slowing and close to peaking.
The Australian dollar fell sharply on the news, losing almost half of a percentage point before recovering some lost ground.
The Commonwealth’s standard variable rate will rise by 15 basis points to 5.60% for owner occupied home loans. The investment loan variable rate will also increase by 15 basis points to 5.87%.
Like Westpac, the Commonwealth linked the decision to increase home loan rates to the new capital rules designed to make banks safer from a financial crisis.
“The Commonwealth Bank is supportive of an Australian financial system that is strong, stable and competitive,” says Matt Comyn, Group Executive for Retail Banking Services.
The bank recently raised $5.1 billion to strengthen its capital position in line with regulatory requirements.
“We have now reviewed our home loan pricing in light of these changes,” Comyn says.
“The cost of the new capital required to make the Australian banking system more secure needs to balance the interests of our customers, as well as the nearly 800,000 households who are direct shareholders and the millions more who are invested through their superannuation funds.”
Commonwealth’s rate rise is effective from November 20, the same date Westpac’s come into force.
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