Rates Up At Commbank

The Age

Saturday April 5, 2008

Jacob Saulwick, Sydney

THE big banks continue to feed their borrowers bad news, with Commonwealth Bank last night announcing it will increase mortgage rates by 12 basis points.

The rise, adding about $25 a month to the average $300,000 mortgage, takes Commonwealth's variable rate to 9.44%, effective from Wednesday.

The smaller Suncorp also lifted rates last night by 5 basis points, taking its variable home loan to 9.37%, as banks continue to report higher funding costs in international markets.

Commonwealth Bank said that even with the latest increase it was still absorbing a "significant portion" of additional costs due to the breakdown in funding markets triggered by the crisis in subprime mortgages.

After the big banks broke rank with the Reserve Bank this year and started increasing rates independently, Commonwealth Bank had offered the lowest variable rate among the big five banks before its latest move.

But its mortgages are now more expensive than National Australia Bank's at 9.36%, and 9.37% at ANZ and Westpac.

Last week, St George increased its mortgage interest rates to 9.47%.

Market watchers had expected Commonwealth Bank would be able to hold off from increasing rates because it had the largest deposit base and therefore the least need to tap global markets for funding.