The Commonwealth Bank, this country’s biggest lender to residential mortgage borrowers, has come up with a “monster hike” (as The Australian tagged it), but the best bit about this bad news story is that it should encourage homebuyers to look elsewhere!
The news is that the CBA has pushed up its one-year fixed rate by 1.4% and it equally hits owner-occupiers and investors who want to lock in their rate.
At the same time, CBA has cut its variable home loan rate by 0.15% to 2.79%, but you’ll only get this if you have a 30% deposit. This comes hot on the heels of a 0.5% rise in early June after the Reserve Bank raised rates by that amount, taking our cash rate to 0.85%, after being 0.1% for most of the pandemic era. In case you’ve been avoiding bad home loan news, another cash rate rise of 0.5% is expected this coming Tuesday. With this latest 1.4% hike by the CBA, it looks like it wants to get in ahead of the pack.
But why?
I’m not sure it’s a great marketing message if it leaves the bank looking like ‘Ming the Merciless of Money’, but this move made me do some homework on what’s out there from other lenders. I hope other Aussies do this too because what I found told me that their new one-year fixed rate of 4.99% isn’t a great deal.
Have a look at my figuring here below:
And when it comes to the five-year rate, I reckon we’ll get a recession before five years is up. If that happens, interest rates would fall. However, if you want a five-year fixed rate, Auswide Bank has a 5.19% loan. And if you want a loan from a well-known bank, Bendigo has one at 5.89%, which is miles better than CBA’s 6.69%.
If I was going to lock in, I’d be keener on locking in a two- or three-year rate, which is more like 4.3% or a bit higher but they’re a long way from 6.69%.
The bottom line is this: if you’re a borrower, do your homework on websites such as RateCity, Finder, etc. And it could be a good idea to check out a few mortgage brokers who might be good at finding you a better deal than some of the banks might try and offer you.
If you’re asking why the CBA is going for such a big rate rise, I guess the best answer is to make money!