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CBA First to Hike Rates

In a much talked about topic, CBA has become the first big four banks to lift interest rates after the RBA raised rates in their Tuesday morning.

Commonwealth Bank of Australia (CBAPG) on Thursday raised its home loan variable interest rates by 50 basis points (bps) per annum, matching the central bank's interest rate hike this week. This means now that the RBA cash rate is now 1.85%.CBA advised home loan variable interest rates will lift by 0.5% per annum. NetBank saver variable interest rates will also rise by 0.5%.

Retail banking group executive Angus Sullivan said:

“We have been helping customers understand the changing rate environment and consider what it means for them, and we will continue to be there for them.”

The market was definitely expecting this to occur but concerns are being raised into the housing affordability of the domestic economy. And with this lower affordability, it will inevitably lead to higher risk of home default. Some could say this has contributed to the uncharacterisally lack of announcements from the big four banks in the last two days.

Conversely, analyst from Morgan Stanley Richard Wiles is predicting higher rates and a bigger yield curve will actually help CBA’s net interest margin by $250 million in the second half of 2022.

He stated in the Australian Financial Review:

“More importantly, we expect a larger benefit in the first half of 2023, as the full period impact of rate hikes and deposit pricing power easily offsets mortgage competition.”

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