Commonwealth Bank lifts fixed rates by 1.4 per cent ahead of key RBA meeting

Australia’s largest bank has raised fixed rates for customers by 1.4 per cent ahead of next week’s RBA meeting, as experts say larger hikes are on the way for homeowners.

Commonwealth Bank has hiked fixed rates by a massive 140 basis points for both owner-occupiers and investors on all fixed rate terms.

The bank has also cut its lowest variable home loan rate by 0.15 percentage points to 2.79 per cent with one major catch – the revised rate is only for new customers with a 30 per cent deposit.

The raft of changes made by CBA on Thursday come less than weeks after the bank hiked rates for both new and existing variable customers by 0.50 per cent, following the June cash rate hike by the Reserve Bank of Australia.

It comes as analysts expect the RBA to lift the official cash rate next Tuesday by another 50 basis points to 1.35 per cent following stronger than expected retail sales data released on Wednesday.

RateCity.com.au research director Sally Tindall said there hasn’t been one-off hikes of this size and scale from CBA on its records.

“The bank is responding to the rising cost of fixed rate funding and a market that refuses to believe the RBA will stop hiking the cash rate at around 2.50 per cent,” she said.

“It’s incredible to see fixed rates move this dramatically in such a short space of time. The sub-2 per cent fixed rates from 12 months ago now seem like a distant dream.

One-year fixed rates with CBA will be 4.99 per cent under the changes, while five-year rates are now 6.69 per cent.

Analysis by RateCity.com.au showed that mortgage holders with a three-year fixed rate had a rate of 2.19 per cent one-year ago compared to 6.39 per cent today. Four-year fixed rates have gone from 2.24 per cent to 6.59 per cent during the same period.

Ms Tindall said other major banks are expected to follow in CBA’s footsteps with monster rate hikes.

“Westpac and NAB’s fixed rates are now, in many cases, over a percentage point lower. It’s only a matter of time before these banks hike fixed rates again,” Ms Tindall said.

“While CBA might have turned its back on competition in the fixed rate sector, it has got its eyes squarely focused on reeling in new variable rate customers.”

Customers with a 30 per cent deposit can secure a variable rate of 2.79 per cent under the changes by CBA compared to 2.94 per cent previously.

Savers have however been left with the short end of the stick, with CBA only increasing the savings rate for new customers. Its introductory rate on its NetBank Saver has been upped 0.30 per cent to 0.80 per cent, which after five months reverts to the unchanged rate of 0.3 per cent.

Originally published as Commonwealth Bank lifts fixed rates by 1.4 per cent ahead of key RBA meeting