The Commonwealth Bank of Australia and ANZ Banking Group have joined Westpac in hiking interest rates, increasing variable home loan interest rates by 15 and 16 basis points respectively.
ANZ became the second major bank after Westpac to make the move to raise home loan interest rates, with Commonwealth following the announcement within the hour.
Under pressure from narrowing margins and higher funding costs, eyes now turn to the National Australia Bank to follow suit.
The two big four banks both out-hiked Westpac’s original announcement of a 0.14 percentage point increase.
In statements released on Thursday, both banks blamed higher funding costs that will “remain elevated for the foreseeable future”.
“As a result of this, we have made the decision to raise our variable home loan rates to partially offset the increased costs,” Commonwealth group executive Angus Sullivan said.
Commonwealth will increase its variable home loan rates by 15 basis points from 4 October.
For owner-occupiers, the standard variable home loan rate will increase to 5.37 per cent for customers with principal and interest repayments, and 5.92 per cent for those with interest only payments.
For investors, the standard variable home loan rate will increase to 5.95 per cent for those with principal and interest repayments, and 6.39 per cent for interest only repayments.
ANZ customers can expect their variable interest rates to increase by 0.16 of a percentage point on September 27.
Owner-occupiers with a principal and interest loan will now be paying 5.36 per cent, interest only loans will increase to 5.91 per cent.
For investors, the standard variable home loan rate will increase to 5.96 per cent and 6.42 per cent for investors with interest-only loans.
Financial services comparison website Mozo calculated the impact the interest rate hikes will have on the cost of a typical metropolitan home loan.
For an owner-occupier with a principal and interest $800,000 home loan with a term of 30 years the banks’ decision will mean an increase of up to $79 a month.
“These rate hikes couldn’t come at a worse time for property prices,” Mozo director Kirsty Lamont said.
“Sizeable price drops have already been recorded across some of Australia’s capital cities and as the cost of borrowing rises, prices are likely to fall even further.”
Lamont says the rate hikes from the ANZ and Commonwealth Banks comes as no surprise.
“The big banks have been noticeably more strategic about the timing of their hikes this time around against the backdrop of the Banking Royal Commission.
“It’s only a matter of time until NAB joins the fray.”