Borrowers advised to shop around as rate hikes ratchet up mortgage payments

Borrowers are being urged to shop around as big bank rate hikes send mortgage payments higher.

Cropped image of businessman calculating tax by model house and stacks of coins on table

A million-dollar mortgage with CBA will now cost an extra $1,117 year after the bank raised rates by 15 basis points this afternoon, minutes after ANZ made a similar announcement.

ANZ raised its variable home loan rate by 16 basis points, citing high wholesale funding costs and market conditions.

The move means mortgage holders with a million-dollar loan will have to fork out an additional $1,191 a year, according to data by comparison website RateCity.

On a $500,000 loan, ANZ mortgage holders would be paying an additional $596 a year and CBA mortgage holders would be paying $559 extra.

It comes a week after the nation’s second-largest lender, Westpac, raised its variable interest rate by 14 basis points.

“CBA and ANZ’s decision to hike rates hot on the heels of Westpac was a predicable step in what is becoming a well-worn routine,” RateCity research director Sally Tindall said.

“In fact, hiking on the same day means they can shoulder the backlash together.”

In July, RateCity estimated that the average mortgage holder with a million-dollar loan across the market would be paying an additional $715 a year on average as non-banks and smaller lenders raised rates.

The most common rate rise was 10 basis points since smaller lenders began hiking rates in March.

“What this rate hike means is that the vast majority of variable rate homeowners will now be shelling out more on their mortgage each month,” Ms Tindall said.

“NAB would do well to break free of tradition and find a different way to wear the additional expense.”

The move brings Commonwealth Bank’s standard variable rate for owner occupiers to 5.37 per cent per annum, and ANZ’s standard rate to 5.36 per cent.

“While Australia’s big banks might move like a flock of sheep it doesn’t mean their customers have to,” Ms Tindall said.

“If you live in your own home and own at least 20 per cent of it, start shopping around — you’ll be surprised at what rates are on offer.

“Plenty of lenders are ready and waiting to take on your business with rates as low as 3.44 per cent.”