Commonwealth Bank of Australia (CBA) has become the second major bank to raise rates on fixed term mortgages, following in Westpac’s footsteps last week.
The increases apply to both owner occupier and investment loans, and were effective as of 2 December. Standard variable rates remain unchanged and clients who already have a fixed rate loan remain unaffected by the changes.
Dan Huggins, CBA’s executive general manager of home buying, 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.
Thus far, the biggest increase is on the five-year fixed investment loan rate, up 65 basis points to 4.79%. CBA’s most popular fixed term product, the three-year owner occupier loan, rose 20 basis points to 4.09%. This adds approximately $12 a month to the cost of repaying every $100,000 on a three-year loan.
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%.
Westpac was the first major bank to raise rates on its fixed term mortgages. The Sydney-based bank increased rates on its fixed term investment loans by up to 60 basis points during the last week of November.
Other smaller lenders, such as ME Bank, have also raised variable rates as the cost of money for banks has been rising over the last three months. UBank, an NAB subsidiary, also increased its variable home loan rates by 10 points.
Huggins said a major driver in the changes was the swap rates, which is 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.
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