Commonwealth Bank has raised fixed mortgage rates sharply in response to rising borrowing costs as markets bet on sharp rate hikes from the Reserve Bank.
CBA, the country’s largest bank, on Thursday increased its fixed rates for terms from one to five years by 1.4 percentage points, sparking predictions that other banks would likely increase fixed rates further. The change only applies to customers who take out new fixed-rate loans.
According to RateCity, the changes mean that a one-year fixed mortgage rate at CBA is now 4.99 percent, while the three-year rate has risen to 5.79 percent.
It comes after fixed interest rates – which reflect market expectations of where the spot interest is headed – have already risen sharply since late last year as financial markets bet on further rate hikes from the RBA.
Research director at Ratecity Sally Tindall said the comparison website had not seen one-time increases to this scale from CBA in its records.
Less than a year ago, CBA still offered one fixed rate below 2 percent. Today, the bank’s lowest fixed rate is just under 5 percent, while the majority is well above 6 percent,” said Tindall.
Tindall said that while CBA pushed fixed rates sharply higher, it also competed more aggressively on variable rates. CBA reduced the lowest variable rate by 0.15 percentage points to 2.79 percent, although this was only available to new customers with a 30 percent down payment.
A CBA spokeswoman said the rate hikes were a result of rising borrowing costs and also a result of “current market conditions.”