CBA announces interest rate changes

Another big four bank has reacted to the latest RBA decision, as Aussies face the heaviest mortgage repayment burden in history.

Another big four bank has reacted to the Reserve Bank’s decision to hike rates again for the 12th time in 14 months.

On Tuesday, Australia’s central bank hiked up interest rates by 25 basis points, bringing the cash rate to a whopping 4.1 per cent.

That’s a significant jump from the historic pandemic low of 0.1 per cent that Australians enjoyed for more than two years.

This marks the 12th time the bank has hiked rates since May last year and is the highest the cash rate has been for the past 11 years.

Mortgage owners have been hit with a 400 basis point hike in the space of a year in what has been hailed as the fastest tightening cycle on record, as inflation stays stubbornly high.

On Friday, Commonwealth Bank announced its changes.

“Following the Reserve Bank of Australia’s (RBA) decision to raise the official cash rate by 0.25% per annum (p.a.), CBA will increase interest rates across a number of its savings products, and will lift its home loan variable interest rates by 0.25% p.a,” a spokesman said.

“All savings and home loan variable rate changes announced today will be effective 16 June 2023.

The NetBank Saver standard variable interest rate will increase by 0.25% p.a. to 2.20% p.a. The 5-month introductory variable interest rate will increase by 0.25% p.a. to 4.75% p.a.

The GoalSaver with bonus interest rate will increase by 0.25% p.a. to 4.65% p.a., comprising a standard variable rate of 0.40% p.a. and bonus interest rate of 4.25% p.a.

The Youthsaver with bonus interest rate will increase by 0.25% p.a. to 4.75% p.a., comprising a standard variable rate of 2.35% p.a. and bonus interest rate of 2.40% p.a.

On Tuesday afternoon, Westpac was the first bank to pass on the rate rise to its customers.

Home loan variable interest rates will increase by 0.25 per cent for new and existing customers effective June 20, while some customers will be able to access a new special term deposit offer of 4.50 per cent for 12 to 23 months, effective June 9.

Westpac is the first to pass on the rate hike. Picture: John Gass/NCA NewsWire

“We understand interest rate increases put more pressure on household budgets,” said Westpac’s head of consumer and business banking Chris de Bruin.

“The majority of our customers are managing okay, but we know with each rate change it’s getting more challenging. We’re reaching out to some customers who may need additional support and have competitive rates available for those rolling off fixed loans to make the change easier. For customers in financial difficulty we are here to help and encourage them to call us early if they’re concerned.”

It comes after Australia’s four largest banks offered their cash rate predictions.

NAB has called 4.10 per cent as the terminal rate, meaning the current rate is expected to be the peak, and thinks this will drop down to 3.10 per cent over the following 12 months.

ANZ had the most dire forecast of all the four banks, predicting 4.35 per cent to be the terminal rate, which won’t be reached until August. That means Australians are in for another rate rise before things start to take a turn.

CommBank and Westpac had both incorrectly predicted a peak of 3.85 per cent.

CommBank forecast that the RBA would pause this month and by August next year the cash rate would be back down to 2.6 per cent, while Westpac thought the rate would bottom out at 2.10 per cent in May next year.

Phil O’Donoghue, chief economist at Deutsche Bank, warned, “We now anticipate the likelihood of multiple rate hikes before the year’s end. The only remaining uncertainty for us is when these hikes will take place”.