Commonwealth Bank lifts fixed rates

Commonwealth Bank lifts fixed rates
Commonwealth Bank lifts fixed rates

The Commonwealth Bank is the latest lender to lift interest rates for homebuyers looking to fix their home loan.

The country’s biggest lender lifted the rate of its popular 3-year fixed rate by 0.20 percentage points to 4.24 percent on Friday.

It also lifted its longer-term 5-year fixed rate by 0.60 percentage points to 4.74 percent.

CBA was the second major bank in a fortnight to lift fixed rates following Westpac.

A analysis shows that a further 20 lenders have lifted rates 268 fixed products since November 1.  

Peter Arnold, data insights director at said fixed rates are based on market expectations of future rates and "are the best indicator that we’ve got that a variable rate hike on the way.".

“Previously, banks were betting on lower rates in the future but we’re seeing those expectations change by the day.

"Shorter-term fixed rates are still sitting below variable rates, which tells us rates will stay steady when the RBA meets on Tuesday.  

“But longer-term fixed rates, such as 5 years fixed, are sitting higher than variable rates and rising by the biggest margins, which tells us that they don’t expect low rates will last forever.”

But he added it’s always a gamble when deciding whether or not to fix your home loan.

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Commonwealth Bank lifts fixed rates

"Our research shows that over the past 20 years, people who stuck with variable rates came out ahead 63 percent of the time,” he said.

“People often fix in panic, for instance in the lead up to the GFC fixing became progressively more popular as rates increased to the point where one quarter of new loans were fixed at over 9 percent in March 2008.

“There are now 240, 3-year fixed rates under 4 per cent and you can even lock in a rate as low as 3.8 percent until Christmas 2021.

"So if you’re someone who prefers the certainty of knowing your repayments, then now might not be the worst time to consider fixing.”

According to Canstar, in monthly repayment terms, CBA’s rate increase will mean a rise of more than $355 for a borrower with a 30-year fixed loan paying the new rate of 4.74 percent.

It was a time of growing uncertainty in the lending market, reflected last week when Australian Broker reported on the growing gap between the most expensive and the most affordable loan rates for residential property has widened to nearly 240 basis points.

Jonathan Chancellor

Jonathan Chancellor

Jonathan Chancellor is one of our authors. Jonathan has been writing about property since the early 1980s and is editor-at-large of Property Observer.

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