CBA breaks ranks, hikes fixed term rate

CBA breaks ranks, hikes fixed term rate

CBA have broken ranks with the bulk of the finance industry by becoming the first bank to raise interest rates since the price war began.

The Big Four bank upped their three-year fixed rate from 2.14% to 2.19% and their four-year fixed rate from 2.19% to 2.24%.

While these are relatively small changes on paper, they may represent a wider sea change in how rates are moving across the industry.

Banks are now beginning to hedge their bets on long-term interest rates, as we stand on the cusp of a new bond period beginning in the coming months.

Though the RBA is expected to keep the cash rate at minimum levels for the next three years, the increased price of bonds may see lenders up their rates independently of the Reserve.

When CBA lowered their two-year fixed rate back in March – the first time they had ever advertised a rate lower than the symbolic 2% threshold – they also upped their four-year rate, with a raft of other banks following their lead in the weeks that follow.

Now, as CBA makes the next step, it remains to be seen if other big name banks will go with them.