Commonwealth Bank has announced it will increase its standard variable home loan interest rate by 37 basis points, in a move that is set to send ripples through the banking industry.
Westpac came under fire earlier this week for lifting their rates to almost double the increase the Reserve Bank stipulated, while National Australia Bank earlier today announced they were keeping in line with the RBA’s increase of 25 basis points.
CBA’s strategic move will see it still appear competitive next to Westpac, but will still garner more than $300 million in interest every year for the banking group. The interest rate rise will be effective Wednesday, December 9.
Choice spokesperson Christopher Zinn said the NAB move was a promising sign, and believes it will encourage more competition within the finance sector. “It’s encouraging that one bank is prepared to break with the pack and not move in lockstep with the other big lenders,” he said.
But Zinn warned that some Westpac customers may be deterred from moving to NAB because exit fees and other switching penalties would nullify the interest savings of a NAB loan.
He called on the Rudd Government to force the banks to abolish exit fees.
