ABC continues to raise interest rates

In Australia, the Commonwealth Bank is now the most expensive fixed-rate lender of the Big Four, leaving room for other big lenders to increase borrowing costs and remain competitive.

The latest Commonwealth Bank increase will add about $ 80 per month in repayment fees to fixed three- and five-year home loans.

The CBA’s two-year rate rose a quarter of a percentage point to 2.59%, its three-year rate rose 0.3 percentage point to 2.99%, its four-year rate went up increased by 0.20 percentage point to 3.09%. and its five-year rate jumped 0.30 percentage points to 3.39 percent.

RateCity’s research director Sally Tindall said the ABC had once again bowed to higher pressures on funding costs.

“It’s raining rate hikes and the storm is far from over,” she said.

“The tide of fixed rate hikes is expected to continue as the cost of fixed-term financing continues to rise.”

“The number of fixed rates below 2% is rapidly decreasing.

“Six months ago there were 161 fixed rates below 2%. Today there are only 87 and we expect that number to continue to drop. “

Several factors are contributing to the rise in fixed rates.

The RBA’s $ 188 billion facility to provide low-cost 0.1% three-year loans to commercial banks ended in June and banks must gradually replace this source of funding with higher market rates. .

Rising bond yields due to higher global inflation, along with doubts about the RBA’s ability to hold rates through 2024, have also sparked bank financing costs for fixed rate mortgages. .

The three-year banknote swap rate, a measure of bank borrowing costs in wholesale markets, fell from around 0.4% to 1.4%, due to a series of local factors and global.

Variable rates on home loans have come down as banks compete more to hunt customers who are not stuck in fixed loans and variable loans become more profitable compared to fixed loans.

Fixed-rate home loans had jumped to a record 40% to 50% share of new mortgages, after banks took advantage of the RBA’s term financing facility.

Earlier this month, Commonwealth Bank shares suffered their worst single-day selloff since the depths of the March 2020 COVID-19 correction, as investors worried about squeezing profits caused by the record high cash rate and fierce competition from home loans.

The CBA’s net interest margin – the difference between what it pays its depositors and bond investors for money and what it charges its clients – has fallen from 2.04% to a level that , according to banking analysts, is now less than 2%.

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