Australia's largest lender increases interest rates

by Julia Corderoy27 Jul 2015
Commonwealth Bank is the second major bank to announce interest rate hikes for investment loans, in a bid to dampen investor lending growth in its mortgage portfolio. 

After ANZ unveiled interest rate changes last week, Commonwealth Bank has now followed suit, announcing it will increase the standard variable rate for investor home loans by 27 basis points to 5.72%. It will apply to new and existing customers and will come into effect from 10 August 2015.

Effective Friday 31 July, fixed rates for all new investor home loans will also increase by between 10 and 40 basis points. The one-year fixed rate will be increased to 4.94%, the two, three and five-year fixed rates will be upped to 5.04% and the new four-year fixed rate will be 5.14%. 

Matt Comyn, group executive for retail banking services says increasing rates was unavoidable to ensure the major bank remains within APRA’s 10% growth guideline. 

“As Australia’s largest home lender, we support the prudential regulator’s actions to ensure lending practices remain sustainable and we have been actively managing our investment home loan portfolio to remain below the 10% growth limit.

“Despite making a range of changes to our investor lending policies in the past few months we have witnessed ongoing investor lending growth, and at an industry level, investor lending approvals remain 22% higher than 12 months ago.”

However, Comryn says the new investment home loan variable rate of 5.72% remains one of the lowest rates offered by CBA, and is still 0.18% lower than the rate six months ago. 

It isn’t all rate increases though. Effective from Wednesday 22 July 2015, Commonwealth Bank cut rates across its fixed rate owner-occupied loans, by up to 30 basis points. 

“In the current market conditions, we believe these changes strike an appropriate balance in our portfolio between owner occupied home loans and those seeking investment loans,” Comyn said.

The one, two and three-year owner-occupied fixed rates have been reduced to 4.64%, while the four-year fixed rate has been slashed to 4.84%. The five-year owner-occupied fixed rate, however, has been increased by 20 basis points to 4.94%.
 

COMMENTS

  • by Richard 27/07/2015 8:49:47 AM

    Second major to take the cash grab option rather than LVR adjustments. I wonder if the TAB will be taking bets that Westpac & NAB follow suit in the next 5-10 business days. If second & third tier lenders don't take advantage of this there missing a significant opportunity.

  • by Old Country Broker 27/07/2015 8:56:29 AM

    Existing investment clients to get hit by the increase as well - talk about a cash grab. Both lenders increasing rates by .27%, seems a strange amount to increase, collusion anyone??

  • by Luke 27/07/2015 8:58:01 AM

    The banks can't go the hard line LVR approach as that would crash the OTP apartment market.