Banks Shifting on Fixed Rate Mortgages

Tuesday August 11, 2009

There has been a shift in the banking industry as the fixed rate loans begin to rise again with the banks reactions already taking effect after two of the four major banks of Australia raise their fixed rates.

Both the Commonwealth Bank and Westpac have raised their fixed rate loans after official figures from the Reserve Bank of Australia have shown that the number of new mortgages fixed for two years or longer has declined to its lowest point in twenty years, to 1.9 per cent.

The latest changes made by Commonwealth Bank show that the longer the time length of a loan, the higher the rise in its rates.

Several increases to fixed rates include customers of the fixed four year loan to experience a rates rise of 0.6 percentage points to 7.59 per cent, two-year loans climbing 5.94 per cent to 6.54 per cent and 15 year loans now attached with a rate rising 0.25 per cent to 8.44 per cent. Also, the Commonwealth Banks one year fixed mortgage with a redraw option rose slightly 0.15 points to 5.54 per cent.

Overall, some Commonwealth Banks customers may end up paying a massive additional $116 more in monthly repayments through their fixed mortgage interest rate. The bank has blamed the rising cost of bank funding for the increase, with support market data being the increasing housing market.

The Commonwealth Bank has equaled Westpac in the move to increase the fixed rates on loans with ANZ the only one of the four big banks in Australia not to raise its fixed rates, as yet. It is important to note however, that both Commonwealth Bank and Westpac are market leaders in the mortgage lending industry.

At present, Australian banks have almost complete market share of mortgage lending being responsible and writing 92 per cent of all new loans.

Compare your home loans here on Banks.com.au and see if you are getting the most from your lender

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