The Commonwealth Bank of Australia (CBA) has advised in light of the Reserve Bank of Australia’s (RBA) cash rate decision on 3 May 2022, CBA will increase home loan variable interest rates by 0.25% p.a.
And while the CBA has become the first major bank to pass on the rate rise, all four big banks are expected to pass on the full 0.25% increase to customers.
CBA Standard Variable Reference Rates from 20 May 2022
• Owner Occupier Principal and Interest Standard Variable Rate home loans will increase by 0.25% per annum (p.a.) to 4.80% p.a.
• Investor Principal and Interest Standard Variable Rate home loans will increase by 0.25% p.a. to 5.38% p.a.
• Owner Occupier Interest Only Standard Variable Rate home loans will increase by 0.25% p.a. to 5.29% p.a.
• Investor Interest Only Standard Variable Rate home loans will increase by 0.25% p.a. to 5.64% p.a.
Group Executive, Retail Banking, Angus Sullivan had this to say, “This is an important time to support customers as some may not have experienced an interest rate increase since they took out their loans.
“Some options available to help our customers manage repayments include fixing or splitting loans or setting up an offset account.”
The new rates for CBA customers will take effect on 20 May 2022.
This increase of the cash rate by the Reserve Bank of Australia of 25 basis points from 0.10% to 0.35% is the first rate rise since November 2010.
The average owner-occupier with a $500,000 debt and 25 years remaining on their mortgage will see repayments rise by around $65 a month, following the 0.25% increase.
In making his historic decision, RBA Governor Dr Philip Lowe said he was aware of the central bank’s role to play in controlling inflation.
“The Board judged that now was the right time to begin withdrawing some of the extraordinary monetary support that was put in place to help the Australian economy during the pandemic,” Mr Lowe said.
“The economy has proven to be resilient, and inflation has picked up more quickly, and to a higher level, than was expected, “RBA Governor Dr Philip Lowe added.
More rate rises expected
RBA Governor Dr Philip Lowe said that the move would bring the high inflation rate back into line – and foreshadowed that further rate rises were all but guaranteed.
“The board is committed to doing what is necessary to ensure that inflation in Australia returns to target over time.
“This will require a further lift in interest rates over the period ahead. The board will continue to closely monitor the incoming information and evolving balance of risks as it determines the timing and extent of future interest rate increases.”
On Wednesday 27 April, the Australian Bureau of Statistics announced inflation had risen to 5.1%, its highest point in more than 20 years.
That was spurred on by runaway cost of living rises, predominantly the soaring prices of petrol and home construction.