Three of the leading banks in Australia have rushed to pass on the latest base interest rate hike to borrowers. The move comes following a hike of 50 basis points by the Reserve Bank of Australia earlier this week. The rate increase took the base rate from 1.35% to 1.85%, and banks are now taking swift action to ensure they match the move by the central bank.
The three banks that have already passed on the rate increase to borrowers are the Commonwealth Bank (CBA), ANZ, and Westpac. The fourth of the so-called Big Four, National Australia Bank, has not yet responded to the rate increase. It is reported that in addition to increasing the rates on variable home loans, the banks will also raise deposit rates on some financial products by 50 basis points.
Rate hikes to take effect soon
The half percentage point rate hikes from the banks are set to be implemented in a week, with both CBA and ANZ announcing the increase will take effect from 12th August. It is also likely that Westpac’s rate hikes will follow the increase imposed by the central bank, with variable rates rising by 0.5%.
Following the RBA rate hike, Macquarie Bank has responded by stating it will raise its variable loan rates by 0.5% but will reduce fixed rates by up to 0.75% for both new borrowers and those currently on variable rates. This gives borrowers a little more scope to opt for a more affordable fixed rate loan in light of the increased rate on variable rate loans.
One industry official, Sally Tindall from Rate City, spoke about the decision by CBA, which was the first of the major banks to pass on the rate hike to borrowers.
She said, “CBA’s decision to pass on the full hike to its variable rate borrowers comes as no surprise, however, customers already feeling the heat from the last three hikes may find this a difficult pill to swallow. From next week, CBA’s basic variable rate will hit a three-year high of 3.79% – a huge increase from three months ago when it was just 2.19%.”
Tindall also spoke about fixed-rate mortgage deals, which might appeal to many people due to rising interest rates on variable loans. However, she said that this was something that people needed to consider carefully, as it meant locking up their mortgage for a specified number of years. This could create a lot of issues in the event they have to or decide to break the fixed-term loan contract.