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Banks increase mortgage interest rates

In yet another blow to consumers, the big banks have indicated they will raise their interest rates on fixed rate mortgages, with the Commonwealth Bank announcing they will increase theirs by between 20 basis points and 45 basis points.

The bank’s reasoning behind the decision has stemmed from recent increases in the wholesale market swap rates, from which it funds fixed rate home loans.

Westpac has also increased its one-year rate by 20 basis points and its two-year rate by 30 basis points.

According to Canstar Cannex financial analyst Frank Lopez fixed rates as based on “how much lenders are having to pay for long term funding.”

The news comes after the RBA lowered the official cash rate to a 49-year low of three percent, in order to encourage growth in the economy.

While funding costs have been blamed for the increase, Lopez believes there could be another reason behind the decision, which is based on customer demand.

“By raising rates, it may be looking to make the variable loan more attractive to customers.”

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