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Fixed rate hike frenzy: CBA pulls the pin on rates under 2 per cent

Fixed rate hike frenzy: CBA pulls the pin on rates under 2 per cent

It appears the banks are racing each other to raise fixed rates with CBA now hiking for the second time in just over three weeks.

Australia’s largest bank has followed Westpac, which yesterday hiked its fixed rates for the second time in just over two weeks.

Today, CBA has raised its 1- to 5-year fixed rates by up to 0.50 per cent for owner-occupier and investors.

This means CBA now has no advertised home loan rates under 2 per cent for the first time in almost a year.

Today’s CBA fixed rate changes for owner-occupiers

LoanOld rateNew rateChangeMthly repayments – difference, $500K loan
1-year fixed

1.99%

2.34%

0.35%

$89

2-year fixed

2.09%

2.34%

0.25%

$64

3-year fixed

2.29%

2.69%

0.40%

$104

4-year fixed

2.39%

2.89%

0.50%

$131

5-year fixed

2.99%

3.09%

0.10%

$27

Note: Above rates are for owner-occupiers paying principal and interest on a package rate with an annual fee of $395. Monthly repayments are based on a $500K, 30 year loan over the fixed rate term.

Banks race to raise fixed rates as funding costs increase

Analysis of the RateCity.com.au database shows a total of 33 lenders have hiked at least one fixed rate in the last month.

Four lenders have hiked their fixed rates twice in the last month: CBA, Westpac, AMP and BDCU Alliance Bank. It’s likely this list will grow.

Lenders that have moved at least one rate in the last 1 month (6 Oct to 5 Nov 2021)

Lenders that have cutLenders that have hiked
Variable 282
1 yr fixed128
2 yr fixed320
3 yr fixed229
4 yr fixed022
5 yr fixed127

Source: RateCity.com.au

RateCity.com.au research director, Sally Tindall, said: “the fixed rate hikes are now coming thick and fast and they’re getting bigger as we go.”

“Anyone who is in the process of fixing their rate with Australia’s largest bank, and didn’t pay a rate lock fee, will be kicking themselves this morning,” she said.

“This latest round of hikes from CBA is more than just a tweak, with increases of up to 0.50 per cent on some fixed rates.

“The mortgage market is undergoing a transformation and it’s happening faster than expected. The speed at which global economies are improving has seen the cost of buying funds spike, putting pressure on banks to lift fixed rates.

“Australia’s two largest banks have hiked fixed rates this week and we expect big four bank rivals NAB and ANZ will follow suit in a matter of days, along with a flurry of other lenders.

“CBA has abandoned its efforts to keep at least one fixed rate under 2 percent. While a rate starting with a ‘1’ is a great marketing tool, it was clearly unsustainable for the bank.

“Despite yesterday’s hikes, Westpac still has two fixed rates under two percent, however, in this climate, it’s hard to see these rates sticking around for much longer,” she said.

Scenario: how new CBA customers may have been affected

RateCity.com.au analysis shows a customer who is currently applying for a $500,000, 3-year fixed rate with CBA, could potentially pay an extra $5,503 over the fixed-rate term if they didn’t lock in their rate. 

In this scenario, the borrower would have been better off paying CBA’s rate lock fee of $375. However, this only applies if rates rise during the application process. 

Loan size

Cost of 3 yr loan (2.29%) + rate lock fee

Cost of 3 yr loan (2.69%)

Difference

$500K

$33,537

$39,040

$5,503

$1M

$66,698

$78,079

$11,381

Source: RateCity.com.au Notes: based on an owner-occupier paying principal and interest, taking out a 3-year fixed rate loan with CBA. The cost includes interest plus the rate lock fee in the case of the person locking in their rate. Does not include other fees. CBA's rate lock fee is currently $375.

CBA home loan rates then and now

Loan term6 months agoTodayDifference
1-year fixed

2.09%

2.34%

0.25%

2-year fixed

1.94%

2.34%

0.40%

3-year fixed

2.14%

2.69%

0.55%

4-year fixed

2.19%

2.89%

0.70%

5-year fixed

2.99%

3.09%

0.10%

Source: RateCity.com.au. Note: 6 months ago was 5 May 2021. Rates are for owner-occupiers paying principal and interest on a package loan.

Lowest big four bank owner-occupier home loan rates

CBAWestpacNAB ANZ
1 yr fixed

2.34%

1.99%

1.99% 

1.99%

2 yr fixed

2.34%

1.99%

2.09%

2.09%

3 yr fixed

2.69%

2.29%

2.28%

2.39%

4 yr fixed

2.89%

2.69%

2.59%

2.69%

5 yr fixed

3.09%

2.99%

2.99%

2.89%

Variable

2.29%

1.99% for 2yrs then 2.49%

2.29%

2.72%

Source: RateCity.com.au. Note: CBA and Westpac rates are for a loan to value ratio of up to 70%.

Lowest rates on the RateCity.com.au database

LenderAdvertised rate
1 yr fixedGreater Bank, Bank of Us

1.59%

2 yr fixedGreater Bank

1.59%

3 yr fixedCommunity First Credit Union

1.79%

4 yr fixedFreedom Lend

2.27%

5 yr fixedFreedom Lend

2.27%

VariableReduce Home Loans

1.77%

Source: RateCity.com.au Note: Rates are for owner-occupiers paying principal and interest. Some LVR and location requirements apply. 

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This article was reviewed by Research Director Sally Tindall before it was published as part of RateCity's Fact Check process.

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