Sign in Subscribe
Real estate industry

Commonwealth Bank Raises Interest Rates on Fixed Rate Mortgages Amid Government and Industry Criticism

Strategic Insights

— 2 min read

The Commonwealth Bank of Australia is increasing interest rates on its fixed rate mortgages, despite widespread criticism from the government and industry players over the banking sector's failure to pass on the full amount of interest rate cuts to customers. The bank's move comes as the federal government proposes new legislation to give consumers more power to challenge "unfair" contractual terms, including exit fees and penalty fees. A recent survey also found that 86% of people believe banks should pass on official rate cuts in full.

Key Takeaways:

  • The Commonwealth Bank of Australia will raise interest rates on its fixed rate mortgages by between 20 basis points and 45 basis points, effective from Tuesday.
  • The bank cited recent increases in the wholesale market swap rates as the reason for the rate hikes, which will affect four-year, seven-year, and other fixed rate home loans.
  • The rate hikes will result in interest rates on CBA's four-year fixed rate home loans rising to 6.59%, while seven-year home loans will increase to 7.24%.
  • The federal government has proposed new legislation to give consumers more power to challenge "unfair" contractual terms, including exit fees and penalty fees.
  • The legislation is in response to criticism from industry players and the public over the banking sector's failure to pass on the full amount of interest rate cuts.
  • A survey by Essential Research found that 86% of people believe banks should pass on official rate cuts in full, while 78% believe the federal government should have the power to force banks to do so.
  • Mortgage broker Loan Market Group recommends that borrowers fix their home loans now, despite the Reserve Bank of Australia's expected further rate cuts.

Statistics:

  • 86% of people believe banks should pass on official rate cuts in full (Essential Research).
  • 78% of people believe the federal government should have the power to force banks to pass on interest rate cuts (Essential Research).
  • The Commonwealth Bank of Australia will raise interest rates on its fixed rate mortgages by between 20 basis points and 45 basis points.
  • CBA's four-year fixed rate home loan interest rate will rise to 6.59%.
  • CBA's seven-year fixed rate home loan interest rate will increase to 7.24%.
  • The federal government has proposed legislation to give consumers more power to challenge "unfair" contractual terms.

Sources:

  • Asia Pulse, "Commonwealth Bank Raises Interest Rates on Fixed Rate Mortgages Amid Government and Industry Criticism"
  • Essential Research, "Survey on Banks Passing on Rate Cuts" (no date specified)
  • Commonwealth Bank of Australia (no specific date)
  • Reserve Bank of Australia (no specific date)
  • Loan Market Group (no specific date)
  • Australian Bankers' Association (no specific date)
  • AAP (no specific date)

Read more