Commonwealth jacks up interest rates

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Ian Narev insists the Commonwealth Bank is trying to do more to build the trust of its customers.

The Commonwealth Bank has joined the rest of the ‘Big Four’, jacking up interest rates. Photographer: Brendon Thorne/Bloomberg

COMMONWEALTH Bank has become the last of the big four lenders to jack up interest rates.

The bank is hiking investment loans by 26 basis points to 5.94 per cent for interest-only investment loans; and standard variable rates for interest-only owner-occupier home loans by 25 basis points to 5.47 per cent.

Owner occupiers paying down principal and interest on their mortgages will see their rates increased by three basis points, or 0.03 per cent, to 5.25 per cent per annum.

The bank made the announcement just two hours after ANZ became the third to hike rates on Friday afternoon.

RELATED: ANZ now has highest rate for investor home loans

RELATED: Westpac joins NAB in raising investor interest rates

“We encourage customers to switch to principal and interest, where this meets their needs, so they can continue to enjoy historically low rates,” said spokesman Matt Comyn.

Mr Comyn blamed the rise on “rising costs and regulatory responsibilities”.

ANZ left its owner-occupier rate unchanged at 5.25 per cent. The hikes come amid speculation that the Australian Prudential Regulation Authority could tighten investor lending standards in an attempt to rein in Sydney and Melbourne housing price growth.

“These changes reflect a need to closely manage our regulatory obligations, our portfolio risk and the competitive environment,” ANZ Australia group executive Fred Ohlsson said in a statement on Friday.

National Australia Bank and Westpac lifted their rates last week. ANZ’s investor loan rate will rise by 0.25 percentage points from next Friday to 5.85 per cent, while new interest-only investor loans will rise by 0.36 percentage points to 5.96 per cent and new owner-occupier interest-only loans will rise by 0.20 percentage points to 5.45 per cent.

CBA’s standard variable rate for interest-only owner-occupier loans will increase by 0.25 percentage points to 5.47 per cent, its investor variable rate by 0.24 percentage points to 5.80 per cent, and its interest-only investor rate by 0.26 percentage points to 5.94 per cent.

ANZ’s interest-only rates will increase on April 22 for new loans, while those for existing customers go up in late July.

Both ANZ and CBA are hoping customers making interest-only repayments switch to less risky principle-and-interest repayments.

Smaller lenders are also responding — BankSA will keep rates on hold for owner-occupiers repaying the principal, but investors will be slugged an extra 0.24 percentage points (5.78 per cent) for those repaying the principal and interest, and an extra 0.32 percentage points (5.98 per cent) for those only paying off the interest.

Minutes of the Reserve Bank board’s March meeting, released this week, noted “a build-up of risks associated with the housing market”.

The Reserve Bank held its rate steady but several economists described the language as the bank’s strongest yet on the issue, with some interpreting it as a call to APRA to take action.

“Investors have taken yet another blow with the big bank jacking up investor variable rates by a whole Reserve Bank increase,” said Kirsty Lamont, director of price comparison service Mozo.

“The sun appears to be setting on the era of record low interest rates.”

The Australian Bureau of Statistics said last month that about 40 per cent of home loans are for investors with the majority being interest-only loans.

Originally published as Commonwealth jacks up interest rates

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