Banks raise fixed interest rates due to higher funding costs

Despite the Reserve Bank cutting official interest rates this month NAB, and Westpac have confirmed that they have raised interest rates on fixed home loans.

NAB's standard fixed rates for a two year home loan has increased by 20 basis points to 5.29 per cent from the 14th of April, while the rate for a three year home loan has lifted to 5.49 per cent on April 14.

Although the RBA cut the official interest rate to 3 per cent earlier this month, NAB did not pass on any cut to its home loan rates. A spokeswoman for the NAB stated that the increase was due to higher funding costs, and that since the RBA's decision earlier this month the cost of fixed rate loans had increased significantly.

The Reserve Bank stated yesterday that it was willing to cut official interest rates again if economic data continued to come in below expectations. The Central Banks minutes from the board meeting on April 7th have revealed that it has done all it can in terms of monetary policy to get the economy going again, this decision runs counter to the Government's campaign to have banks lower their rates.

Westpac announced yesterday that they were increasing their fixed home loan rates by up to 40 basis points. One year fixed rate mortgages were increased by 20 basis points to 5.39 per cent, while two year term mortgages rose 30 basis points to 5.49 per cent. Three year term mortgages lifted by 40 basis points to 5.79 per cent and five year term mortgages increased by 10 basis points to 6.39 per cent.

Commonwealth Bank also raised their interest rates on fixed rate mortgages by between 20 basis points and 45 basis points from yesterday, but stated that one year home loans would stay the same.

A spokeswoman for the ANZ Banking group has stated that they last changed their rates on fixed home loans on January 7th and that no changes had occurred since then. The ANZ Bank currently charges 5.99 per cent on fixed home loans with one and two year terms, and 6.19 per cent for a three year term, 6.59 per cent for a four year term, and 6.84 per cent for a five year term.

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Published on April 4-nd, 2009 in Home Loans
Damon Rasheed is the CEO of Rate Detective, an Australian financial service comparison sites specialising in Life Insurance, Income Protection Insurance and home loans. Damon holds a Master's Degree in Economics from the University of Melbourne and has been involved in many start-up internet businesses.

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