As predicted, another major has announced hikes in its mortgage rates. Commonwealth Bank will increase in its variable home loan rates by 15 basis points for both owner occupied and investment variable rate mortgages, partially offsetting costs associated with recent changes to capital requirements.
As a result, for owner occupiers, the standard variable home loan rate will increase to 5.60% per annum. For investment home loan standard variable rate customers, interest rates will rise to 5.87% per annum. The new rates will be effective from 20 November 2015.
The bank cites the higher capital requirements as the driver, and says it has carefully tried to balance the interests of its customers and shareholders in pitching the quantum of the increase.
Matt Comyn, Group Executive for Retail Banking Services said: “The Commonwealth Bank is supportive of an Australian financial system that is strong, stable and competitive. We recently raised $5.1 billion to strengthen our capital position in line with new regulatory requirements implemented in response to the Financial System Inquiry. We have now reviewed our home loan pricing in light of these changes.
“As Australia’s largest home lender, we are committed to delivering competitive products and services to our customers, while maintaining an unquestionably strong capital position.
“Any decision to change interest rates is carefully considered. The cost of the new capital required to make the Australian banking system more secure needs to balance the interests of our customers, as well as the nearly 800,000 households who are direct shareholders and the millions more who are invested through their superannuation funds.”
Fixed rates and business rates remain the same, with the current Owner Occupier Wealth Package 2-year fixed rate remaining at 4.29% per annum.
Expect other lenders to follow, using the capital and financial stability alibis to protect margins.
In addition, some will argue the RBA should now cut rates in November, to adjust for recent home lending rate rises, but given the high growth rates in lending, as APRA highlighted today, we think this would be inappropriate.
