Home loan mortgage rate rises continue

Australia’s biggest bank, CBA, has increased its 2- and 4- year fixed home loan rates by 0.05 per cent for owner-occupiers paying principal and interest.

It is the third time CBA has hiked its 4-year fixed rate this year, but the first time the bank has hiked its 2-year rate for owner-occupiers.

“CBA is factoring in a rise in the cost of funding over the next couple of years, particularly now the RBA’s term funding facility has closed.”

A recent economic insights report from CBA shows around half of its new owner-occupier loans settled in June were fixed, with the two-year rate the most popular.

“Despite today’s hikes, CBA still has one rate under 2 per cent – the bank is not going to let go of that easily,” said RateCity.com.au research director, Sally Tindall.

“CBA’s two-year rate was extremely competitive and attracting significant interest. By keeping it just under 2 per cent, the bank is trying to keep momentum going at a more sustainable price," she said.

Analysis of the RateCity.com.au database shows over the last two months, there have been more hikes than cuts in every fixed rate category with the exception of 1-year rates.

But ME Bank has cut rates across a few home loans from early August, while boosting its refinance cashback offer to $3,000.

The cuts were across its two-year fixed and variable home loan range.

The two-year fixed rate Member Package home loan was cut by 20 basis points to 1.89% p.a. (3.17% p.a. comparison rate*) - a "record low" for the lender.

This particular comparison rate applies to owner occupier borrowers with 80% LVR i.e. a 20% deposit, paying principal & interest. 

The same advertised rate applies to other LVRs in the product line, but different comparison rates apply.

A number of other home loans - both fixed and variable - with different LVRs were also cut by between 5 and 31 basis points.

While the majority of changes to fixed rates in the last two months have been hikes, RateCity advise the opposite is happening in the variable rate market. 

RateCity.com.au home loan database analysis shows 49 lenders have cut at least one variable rate in the past two months while 10 lenders have hiked variable rates in that time.

The vast majority of variable rate cuts are reserved for new customers, not existing ones, RateCity research director, Sally Tindall, said.

“Variable rates are at record lows, however, most of these deals are reserved for new customers, not existing ones, unless you specifically ask,” she said.

“Before you call, check what rate your bank is giving new customers for the same home loan, but also find out what other lenders have on offer.

“If you are paying significantly more than a new customer, pick up the phone and ask your bank ‘why?’.

“If you have a good track record of paying down your debt, and the bank thinks you might switch to a more competitive lender, they’re likely to play ball.

“A lot of people think a handful of basis points won’t make much of a difference, but if the discount is permanent, then the savings can potentially run into the thousands in just a few years,” she said.

ME has also increased its cashback offer to $3,000 for externally-refinanced home loans.

The new lending amount must be minimum of $250,000.

Eligible refinancers must apply by Friday 27 August inclusive, and settle by Friday 29 October.

ME Bank CEO Adam Crane said the cuts would assist borrowers "looking to maximise their borrowing in a challenging property market."

In February, ME Bank merged with Bank of Queensland with the deal expected to be finalised this month.