The Commonwealth Bank has become the second big bank to raise rates on fixed term mortgages, following in Westpac’s footsteps last Friday.
The increases apply to both owner-occupier and investment loans and are effective from today. Standard variable rates remain unchanged and anyone already have a fixed rate loan is unaffected by the changes.
The bank’s executive general manager of home buying, Dan Huggins, said they were increasing interest rates on two, three and five-year fixed rate products.
“At the same time, interest rates on our four-year fixed rate product for both owner-occupier and investor home loans, and our one-year investor fixed rate product, are reducing,” he said.
The biggest increase is on the five-year fixed investment loan rate, up 65 basis points to 4.79%, while its most popular fixed term product, the three-year owner-occupier loan, will rise 20 basis points to 4.09%.
The change will add around $12 a month to the cost of repaying every $100,000 on a three-year loan.
The CBA’s one-year fixed term for investors has dropped 20 points, to put it within 0.2% of the owner-occupier rate, which remains unchanged at 4.39%.
Australia’s biggest lender followed Westpac who increased rates on its fixed term investment loans by up to 60 basis points last Friday. Other smaller lenders, such as ME Bank, have also hiked variable rates as the cost of money for banks has been rising over the last three months. National Australia Bank subsidiary UBank also increased variable home loan rates by 10 points.
Huggins said a major drive in the changes was the swap rates – the figure banks will lend to each other over that term.
“In the past two months swap rates have risen significantly, which has increased the cost of providing some of our fixed rate home loan products,” he said.
Since August 31’s lows, when the market was still betting on another cut by the RBA in early 2017, Australian three-year swap rates have risen 53 points from 1.53% to 2.06% today.