Commonwealth Bank of Australia (CBA) and other lenders are raising borrowing rates by up to 50 basis points, slashing discounts, reintroducing hefty administrative fees, and revamping product ranges.

Strong buyer demand for property in Sydney and Melbourne is enabling lenders to offset rising costs and rebuild margins.

CBA is raising rates for the second time in two weeks and is reintroducing additional fees. The Sydney-based bank is set to announce an increase of 47 basis points, or an increase of 4.73% on its three-year special rate investment loans. Meanwhile, the rate on its owner-occupied special rate loan is rising by 30 basis points.   

On top of this, CBA is also reintroducing a $600 establishment fee, or an $8 monthly loan service for the special rate offers.

Other lenders are raising their rates due to fears that a demand surge could overwhelm their administrative systems and accelerate volumes to the regulatory speed limits.

“From time to time, we offer special discounts on select products,” a bank spokesperson told the Australian Financial Review. “This week we informed our mortgage broking partners that our existing 3-year Special Rate Saver Offer has been replaced with new rates on our Extra Home Loan product, which offers a better rate when the introductory two-year special discount expires than the existing Special Rate Saver product."

Sydney-based AMP Bank and Melbourne-based National Australia Bank (NAB) are also revamping their product offerings.

Since Feb. 16, AMP has no longer accepted new refinance applications for investor property lending. Meanwhile, NAB is withdrawing its Homeplus and Peak Performance products. An NAB spokesperson said that existing customers will not be disadvantaged and that it has increased the available product range via mortgage brokers. 

Building society Newcastle Permanent is cutting the discount on its Premium Plus package of mortgage and credit products by 10 basis points to 43 basis points. In January, it increased the cost of fixed rates on owner-occupied and investment loans from between 5 and 25 basis points for one to three years.

Borrowers are responding to a complicated mix of domestic, international, and regulatory funding pressures, plus growing pressures from competitor’s rate increases that could test their administrative capacity to handle a surge in new loan applications.

However, analysis of fixed and variable property loans shows that intense competition around the benchmark 4 percent rate remains strong, despite a big increase in rate rises by several lenders during the past three months.