Australia’s largest bank suddenly raised fixed rates for homeowners and investors by 1.4% on June 30th. This is a move that has surprised the lending market.
according to analysis According to the financial comparison website RateCity, the Commonwealth Bank of Australia (CBA) has raised its one-year fixed interest rate to 4.99%, up 2.90% from a year ago.
Similarly, banks’ five-year fixed rates soared to 6.69%, up 3.7% compared to the last 12 months.
The CBA has also reduced the lowest variable mortgage rates by 0.15%, dropping to 2.79% and 2.89% for homebuyers with 30% and 20-29.99% deposits, respectively.
Sally Tindall, Research Director of RateCity, said raising fixed rates on the CBA is a typical move.
“Banks are responding to rising fixed rate funding costs and markets that refuse to believe that the Reserve Bank of Australia will stop raising cash rates by about 2.50 percent.” She said..
Tindall also noted that banks offered fixed rates of less than 2% than they did a year ago. However, with the latest changes, the CBA’s minimum fixed rate is up to less than 5% and most other rates are up to 6%.
“It’s unbelievable to see fixed rates move this dramatically in such a short period of time,” she said.
“Fixed rates of less than 2% 12 months ago are now a distant dream.”
Fixed rate loans that occupy a small percentage of the market
Regarding the CBA’s fixed rate hike, Peter Tulip, chief economist at the Center for Independent Research, told The Epoch Times that development was not a “big deal.”
“Fixed rate loans are unusually popular and have passed the peak of 46% of mortgages in August 2021,” he said, citing data from the Australian Bureau of Statistics.
“Now, we’re back to a more normal situation where fixed-rate loans occupy a small share of the total.”
In addition, Tulip said financial markets are now expecting floating and fixed rates to rise sharply. Therefore, other banks will soon follow the CBA and raise interest rates.
“In terms of implications, a significant rise in mortgage rates will lead to lower home prices and a significant slowdown in construction,” he said.
The change in the CBA’s fixed rate is due to economists predicting that the Reserve Bank of Australia will raise its cash rate by another 0.5% to 1.35% at its next board meeting on July 5.
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Alfred Bui is a Melbourne-based Australian reporter with a focus on local and business news. He is a former small business owner and holds two master’s degrees in business and business law. Contact him at [email protected].