 Banks raise fixed rates
The Commonwealth Bank has followed other lenders and increased its fixed rate home loans, ahead of any Reserve Bank announcement.
The Commonwealth Bank announced yesterday that one-year fixed rate home loans will rise by 50 basis points to 6.19 per cent. The banks two-year fixed rate would increase by 30 basis points to 6.84 per cent.
Three-year loans were not left out either, with the CBA's three-year fixed loan rising 15 basis points to 7.29 per cent. Then follows the five-year fixed home loan which rises 10 basis points to 6.69 per cent.
A month ago CBA and Westpac raised some fixed rates, now these latest rises are a sure sign the Big Banks are preparing for the RBA to raise the cash rate.
Fixed rates traditionally move before the standard home loan rates do, so these rises come as no surprise to many experts.
The bank's standard variable rates have not been moved, but financial markets are expecting a rush of interest rates rises to be ordered by the Reserve Bank.
A CBA spokesman, Steve Batten, was pointing to higher funding costs for fixed rate loans as the reason for the increases. Mr Batten says that while the global economy may be settling but funding costs have still been rising in recent months.
The general feeling among economists is that the Reserve Bank will raise official interest rates as early as November and perhaps again in December. The RBA is due to meet for its next policy meeting next Tuesday, and borrowers wait to see if rates remain on hold another month at the October meeting.
While the cash rate sits at a 49-year low of 3 per cent after the RBA repeatedly cut official rates late last year, not all of these cuts were passed in to home owners. Most mortgage rates have fallen by around 4 per cent however, with average home loan rates falling to below 6 per cent.
Fixed rates have been increased by most banks in recent months, despite the official interest rate remaining the same since April this year.
The low rates are not expected to last with predictions that official rates could rise by as much as 2 per cent by this time next year. Any official interest rates are sure to be passed on to borrowers and will increase monthly repayments. Borrowers are advised to start budgeting now for any future rate rises.
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