Brokers have reacted the to news that CBA has again raised its interest rates, with 0.05% added to both the 2-year and 4-year owner occupier P&I rates.
While this might not seem like a huge rise, it brings the 2-year rate up to 1.99%, on the edge of the symbolic 2% mark, while it nudges the 4-year rate as high as 2.29%.
It sends the strongest signal yet that Australia’s biggest bank is thinking differently to the Reserve Bank of Australia (RBA) and other authorities in terms of the short to medium term outlook for interest rates.
Where CBA goes, the majority of other lenders will eventually follow, as evidenced by their last rate rise, which has been followed by almost thirty other lenders hiking their price too.
The RBA insists that the cash rate will not rise until 2024, CBA has predicted that this will happen much earlier, as soon as 2024.
“Part of this divergence in their outlook is that whilst RBA doesn’t, at least directly, have a mandate to control property prices, and macroprudential measures are not designed to do this, lenders need to consider APRA’s attitude towards increasing debt levels and other cost of funding.,” said Jay Ahluwalia, mortgage broker at True Savings.
“Lenders seem to be forming the view that given the market conditions, we’ll see the regulator step in, and RBA may need to consider the flow on effect of increased debt on consumption levels, forcing it to ultimately move its timeline to increase rates sooner.”
“It is even more important right now to work out the cost benefit when it comes to fixed rates. We continue to invest our efforts on educating the client about what the options look like right now and in line with their plans for the next few years.”
As trusted advisors, we can help take the complexity out and reduce the uncertainty making the process as smooth as possible.”
CBA acknowledged that changes in the price of money, most notably the change of the term funding period at the start of July, had made their previously record low rates no longer sustainable.
“As part of our regular review and monitoring of our products, we are making some changes to our 2 and 4 Year Fixed rates. These changes do not impact existing fixed rate loans,” said a CBA spokesperson.
“Our competitive home loan rates remain at historic lows and continue to provide value for customers in addition to our industry leading features including Home Loan Compassionate Care, CommBank Green Loan and the recently announced partnership with Amber.”
“These changes reflect increasing funding costs and the broader economic recovery which is on-track despite the current restrictions.”
“For those home loan customers who are impacted by the ongoing restrictions, we remain committed to supporting them and have a range of support options available. These include an extension of the moratorium on foreclosures until 2022 and 2 month repayment deferrals.”
