ANZ and Commbank raise mortgage rate, signalling the end of low interest rates from the big banks

Richard Whitten 6 September 2018 NEWS

Couple shocked by their rate rise.

Now three of Australia's four biggest banks are raising rates, driving repayments up for many borrowers.

ANZ and Commbank have announced today that they will raise interest rates. ANZ will lift rates on all variable mortgages for home buyers and investors by 16 basis points, or 0.16%. The rate hike will take effect on 27 September 2018.

Commbank will raise rates by 15 basis points from 4 October 2018.

Westpac made a similar announcement last week. All the banks cited increasing funding costs as the reason behind the rises.

"This was a difficult decision given we know the impact rising interest rates have on family budgets," said ANZ Group Executive Australia Fred Ohlsson. "The reality is it is more expensive for us to fund our home loans on wholesale markets and we also needed to balance the needs of all stakeholders."

Commonwealth Bank Group Executive Retail Banking Services Angus Sullivan is singing from the same hymn sheet: "We have made this decision after careful consideration. We are very conscious of the impact that increasing interest rates will have on our customers, however it is important that we price our home loan products in a way that reflects underlying costs."

ANZ will not be raising rates in drought-affected areas of regional Australia, claiming in its media release that this would help more than 70,000 of the bank's customers.

How will this impact ANZ and Commbank mortgages?

A 15-16 basis point hike is no joke.

ANZ's lowest variable offer is the Simplicity Plus Special Offer Discount (P&I, for owner occupiers), with a rate of 3.65%. After 27 September, this will jump to 3.81%.

The bank's lowest fixed offer, the two-year Breakfree Package Home Loan, has a 3.75% interest rate that won't change for the first two years of the mortgage.

If you'd borrowed $500,000 over 30 years on an interest rate of 3.65%, your monthly repayments would be $2,287.

A 16 basis point rise would make those repayments equal $2,332 a month. That's $45 a month or $540 a year.

Commbank's lowest offer is currently its 3.69% Extra Home Loan, which will soon be 3.84%. Their lowest fixed rate is the Commonwealth Bank Wealth Package Fixed Home Loan - 2 Year Fixed (Owner Occupier) P&I at 3.79%.

Australia is entering a period of rate rises after a long period of historic lows, so it's unsurprising that 38% of Australians are looking to fix their rate soon, according to a finder survey from July.

Time to switch to a lower rate? Start comparing your options

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