Australia’s biggest bank has finally responded to the interest rate hike two days after it was initially announced.
On Thursday morning, the Commonwealth Bank of Australia revealed it will pass the full cost of the rate hike on to customers.
The Reserve Bank of Australia (RBA) raised interest rates on Tuesday for the fourth consecutive month.
Australia’s central bank raised interest rates by 50 basis points, or 0.5%, bringing the cash rate from 1.35% to 1.85% , largely in line with the economist’s predictions.
So far, Australia’s four biggest banks — The Commonwealth Bank (CBA), ANZ, NAB and Westpac — have made no changes in response to the latest rate hike.
But just before 10am, the ABC said variable home loans would rise by 0.5 per cent annually from August 12, while term deposits would start with the higher return from August 8.
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CBA variable mortgages as well as term deposit accounts and their NetBank Saver accounts will be affected by the change.
Homeowners and investors with variable rate home loans will have to pay an additional 0.5 percent in interest each year.
CBA term deposits and savings account will also increase by 0.5%/
The new term deposit rate will be available from August 8, while the new NetBank savings rate will come into force on August 12 along with home loans.
Angus Sullivan, group chief executive of retail banking, said: “We’ve been helping customers understand the changing rate environment and consider what it means for them, and we’ll continue to be there for them.”
Since May, the cash rate has risen 1.75 percentage points, following four months of consecutive increases by the central bank.
However, the ABC is so far the only one of the big players to respond, and that was almost 48 hours later.
In stark contrast, within hours of the announcement, a smaller bank, Macquarie Bank, passed on the rate hike almost immediately.
Macquarie Bank was the first bank to say it would raise variable mortgage rates by 0.5% on 12 August.
Fees for its savings and day-to-day transaction accounts also increased by 0.50%.
The move affects the estimated 2 million people who are Macquarie Bank customers.
However, CBA, ANZ, NAB and Westpac each have between 8.5 and 17 million customers, according to Statista.
Last month, Westpac gave customers the longest amount of time to prepare for a change to their variable mortgages as well as their savings rates, taking two weeks for the change to take effect, despite and that he announced the change within 24 hours.
The other three banks passed on the change to customers within 10 days after a quick response.
The August hike is not expected to be the last, with economists predicting that interest rates could rise to two percent by the end of the year.
Tuesday’s rate increase means those paying the average home loan of $500,000 will have to pay an extra $140 a month.
Tuesday’s decision is the first time the RBA has raised rates for four consecutive months since introducing the two-to-three per cent inflation target in 1990 as a sign of the inflation and cost crisis of life throughout the country.
This comes after last week’s rise in annual inflation to 6.1%, which was its highest level in 21 years since 2001.
Tuesday’s rate increase means those paying the average home loan of $500,000 will have to pay an extra $140 a month.