Commonwealth Bank has bumped up its three and four year fixed rates on home loans | Ralph Lauren

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Ultra-low home loans could be on the way out with the nation’s biggest lender hiking rates for the second time since March.

Commonwealth Bank has upped its three and four year fixed term owner occupier rates by five basis points and 10 basis points on investor only loans.

CBA’s decision to hike its three-year rate is the first move by any of the major banks and potentially signals the financial incumbent anticipates the Reserve Bank to increase the cash rate by 2024.

The three-year fixed term rate for owner occupiers now sits at 2.19 per cent, while the four-year lending product has been moved to 2.24 per cent.

RateCity research director Sally Tindall said the hikes are small but point to further signs the lending market is rising.

Comm Bank
Camera IconCommonwealth Bank has upped its three and four year fixed term owner occupier rates. NCA NewsWire/Bianca De Marchi Credit: News Corp Australia

“When CBA hiked its four-year rate in March, a flurry of lenders followed in its wake,” Ms Tindall said,

“We expect the same thing will happen with three-year rates in the coming months.”

In March, CBA was the first bank to begin inflating mortgage rates which has then caused a slew of lenders to bump up fixed rates in preparation for a potential change to the cash settings in a few years.

The RBA during the pandemic slashed the cash rate to 0.1 per cent to alleviate pressures facing the economy from the virus induced recession.

A lower cash rate cheapens the cost of money, which banks can pass onto households and businesses in the form of cheaper loans.

RateCity research director Sally Tindall. Supplied.
Camera IconRateCity research director Sally Tindall. Supplied. Credit: Supplied

The RBA also implemented a Term Funding Facility as an additional measure to provide cheaper liquidity to the banking sector.

“Banks are anticipating a rise in the cost of funding over the next few years, with the next cash rate hike expected in 2024, if not earlier, and the end of the RBA’s Term Funding Facility in just over one month,” Ms Tindall said.

“The RBA’s TFF, which offers banks cheap funding fixed for three years, has helped many banks offer record low rates to its customers.

“When the funding wraps up, many banks are likely to recalibrate their rates.”

The lowest three year fixed on offer in the market is 1.79 per cent and is with Credit Union SA.

Reduce Home Loans is advertising the lowest variable rate at 1.77 per cent.

According to RateCity, six lenders have bumped up three-year fixed term rates, while 20 institutions have hiked four-year lending products.

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