Commonwealth Bank could be set to hike rates

Friday 13 August 2010

Article by Mozo

The Commonwealth Bank (CBA) could become the first to enforce an interest rate rise independent of the Reserve Bank, it has been speculated.

According to the Australian, a number of analysts downgraded their earnings forecasts for the CBA after it announced a $5.66 billion net profit and conceded that its key profit margins are struggling with higher costs.

Speculation about a possible hike to home loan rates came after CBA chief executive Ralph Norris said the bank's cost of funding on an average mortgage would rise by 40 basis points in the next year, thereby placing more pressure on the retail bank's margins.

UBS analyst Jonathan Mott told the Australian: "This (margins) remains a keen focus for the market and continues to highlight the need for the major banks to adjust mortgage rates to account for higher funding costs."

Rising interest rates could affect the decisions of Aussies looking to compare home loans in search of the best deals. Lisa Montgomery, head of consumer advocacy at Resi Mortgage Corporation, recently told the Courier-Mail that the establishment of consumer credit protection legislation last month will mean that lenders will have to ensure they do not present customers with "unsuitable'' loan products.

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