CBA raises fixed rates - 2021

As confirmed by the major bank, these changes, which came into effect on 5 November, will see one-year fixed rates for loans with principal and interest repayments rise above their previous rate (which was under the 2 per cent threshold) to 2.34 per cent per annum (4.13 per cent per annum comparison rate). 

Three- and four-year rates have also elevated, now at 2.69 per cent per annum (3.97 per cent per annum comparison rate) and 2.89 per cent per annum (3.95 per cent per annum comparison rate) – a boost of 40 and 50 basis points, respectively. 

These changes also reflect an increase in CBA’s swap rate, with one-year rates increasing by 0.24 per cent, two-year rates by 0.57 per cent, three-year by 0.65 per cent, four-year by 0.62 per cent, and five-year by 0.57 per cent between 1 October and 4 November. 

A CBA spokesperson said in a statement to The Adviser that this decision reflects “the steep increase in funding costs over the past few weeks as well as upgraded economic forecasts”.

Last week (2 November), the Reserve Bank of Australia (RBA) confirmed that the cash rate would remain at 0.1 per cent for the month. 

RBA governor Philip Lowe said at the time that the central bank had adjusted its inflation forecast, and was now estimating hitting 2.25 per cent over 2021 and 2022, and 2.5 per cent over 2023.

However, Mr Lowe affirmed that the RBA would not increase the cash rate until inflation is “sustainably within the 2 to 3 per cent target range”.

CBA’s changes come less than 24 hours after Westpac also announced it would be hiking up its fixed interest rates. 

On 4 November, the major bank confirmed it would be increasing its three-year fixed rate for owner-occupier loans with principal and interest to 2.29 per cent per annum (3.38 per cent per annum comparison rate) – an increase of 21 basis points. 

Four- and five-year fixed rates also grew, both rising by 10 basis points to 2.69 per cent (3.44 per cent per annum comparison rate) and 2.99 per cent (3.53 per cent per annum comparison rate) respectively. 

In a statement, a spokesperson for the big four bank said: “Westpac continues to offer our customers competitive home loan interest rates across variable and fixed rate products.

“We also continually review our home loan products in-line with changing business and market conditions. In making these decisions, we consider multiple factors including the need to manage pricing changes in a sustainable way.”

Speaking of the Westpac rate changes, WLTH head of lending Catherine Mapusua said with improving economic conditions and “banks scrambling to announce interest hikes”, it’s wise to “start preparing for this shift in the interest rate environment”.

"It is important to consider whether a fixed rate suits your needs, as this can restrict additional repayments and may charge break fees if there is a change in your circumstances. If you change banks, sell the property, or need to break the rate of your repayments, you risk charges that can be from a couple of hundred to several thousand,” Ms Mapusua said. 

She added that some borrowers may wish to consider paying a lock fee for a fixed rate, as that would "protect" them rate increases before the loan is advanced, adding that others may wish to fix part of their mortgage "sooner rather than later to ensure [they] can continue to make payments.”

As of the time of writing, National Australia Bank (NAB) had the lowest three-year fixed rate of the big four banks, offering 2.28 per cent per annum (3.91 per cent per annum), while Australia New Zealand Banking Group (ANZ) had the highest with 2.39 per cent per annum (3.27 per cent per annum comparison rate). 

Macquarie Bank has also recently  announced changes to its fixed rates, effective from last week (1 November), increasing one and two-year owner-occupier loans with principal and interest to 2.24 per cent per annum, with a comparison rate of 2.24 per cent per annum (for loans with an LVR of 80 per cent and under). 

For one and two-year investment loans with principal and interest, this rate has increased to 2.54 per cent per annum, with a respective comparison rate of 2.40 per cent and 2.42 per cent per annum (with an LVR of 70 per cent and under).

[Related: RBA calls November cash rate]