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Rate hikes: What they mean for you

rate hikes, arrow up, increase

The “vast majority” of borrowers are set to be stung after two more major banks increased interest rates on Thursday, following Westpac’s move last week.

The Commonwealth Bank (CBA) and ANZ increased interest rates for variable rate loans by 0.15 per cent and 0.16 per cent, respectively, with the hike signalling higher monthly payments for most borrowers.

NAB is the only big four bank to have avoided hiking rates so far.

“CBA and ANZ’s decision to hike rates hot on the heels of Westpac was a predicable step in what is becoming a well-worn routine. In fact, hiking on the same day means they can shoulder the backlash together,” RateCity research director Sally Tindall said.

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“What this rate hike means is that the vast majority of variable rate home owners will now be shelling out more on their mortgage each month.”

Continuing, she added that while the big banks may move together, customers shouldn’t feel any loyalty.

“If you live in your own home and own at least 20 per cent of it, start shopping around – you’ll be surprised at what rates are on offer,” Ms Tindall said.

“Plenty of lenders are ready and waiting to take on your business with rates as low as 3.44 per cent.”

Graham Cooke, insights manager at Finder, agreed, adding that NAB would likely hike its rate in the coming week as well as other smaller lenders.

“Many others will be taking this opportunity to increase rates in the next few days. With funding costs rising internationally, banks will argue that they didn’t have a choice,” he said.

“Since Westpac moved interest rates north last week, it was inevitable the other big banks would follow suit. The big surprise was that it took over a week. We expect NAB to join the others by next week.”

But what does it mean for me?

For borrowers with $300,000 loans, they're looking at paying an extra $335 a year under CBA's rate change, with borrowers paying back loans of $1 million set to be set back an extra $1,117.

RateCity broke it down further:

CBA

Loan size Old standard 

variable 5.22%

New standard variable 5.37%

Extra monthly repayment Extra cost annually
$300,000 $1,651 $1,679 $28 $335
$400,000 $2,201 $2,239 $37 $447
$500,000 $2,752 $2,798 $47 $559
$750,000 $4,128 $4,197 $70 $838
$1,000,000 $5,503 $5,597 $93 $1,117

ANZ

Loan size Old standard 

variable 5.20%

New standard variable 5.36%

Extra monthly repayment Extra cost annually
$300,000 $1,647 $1,677 $30 $357
$400,000 $2,196 $2,236 $40 $476
$500,000 $2,746 $2,795 $50 $596
$750,000 $4,118 $4,193 $74 $893
$1,000,000 $5,491 $5,590 $99 $1,191
Rate hikes: What they mean for you
rate hikes, arrow up, increase
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