Home-buyers Slugged By Bank

AUSTRALIA'S largest home lender, Commonwealth Bank of Australia, yesterday hiked its mortgage rates by 35 basis points - the biggest lift by a bank since last week's official cash rate rise. Like the other major banks, CBA has quickly passed on the official increase by the Reserve Bank of Australia and then added some pain of its own to offset its increasingly costly wholesale borrowings. CBA's standard variable home loan rate will rise to 9.32 per cent from 8.97 per cent from tomorrow. Last week, the Reserve Bank lifted the official cash rate by 25 basis points to 7.25 per cent - its highest level in almost 12 years. The Federal Government has been urging the big banks not to transform the central bank's rate rise into a "double whammy". Yesterday's 10-point top-up by the CBA more than doubles similar moves last week by rival banks. National Australia Bank and Westpac added four and five basis points respectively on top of the official cash rate rise in an effort to claw back increased funding costs caused by the global liquidity crisis. CBA head of retail banking services Ross McEwan defended yesterday's move. He said the bank had already absorbed a significant proportion of the increased funding costs that it had experienced since August last year. "Unfortunately, the volatility in global markets remains and we have seen funding costs continue to increase, particularly since February as funding from global markets has become tighter and as a result more costly," he said. Mr McEwan noted the Reserve Bank's warnings that banks might have to cut back on funding if international markets tightened further. The CBA was committed to its home-loan market, but to do so it would have to pass on to customers its own increased costs, he said. "We are still maintaining a balance between the needs of shareholders and customers by continuing to absorb a significant portion of the additional costs being incurred," Mr McEwan said. The ANZ Banking Group is yet to announce a rise, while St George Bank has signalled it is considering a 40-basis point rise.