CBA raise rates for interest-only loans to 5.94 percent

Blaming booming housing market conditions and also concerns that APRA will further tighten lending standards, the Commonwealth Bank and St George have joined NAB and Westpac in another out-of-cycle increase in mortgage rates for investment and owner-occupier loans.

CBA has raised the standard variable rate on interest-only owner-occupier loans by 25 basis points to 5.47 percent, while principal and interest loans will edge up by 3 basis points.

CBA, which has already tightened investor lending requirements, made the most aggressive push on interest-only investor loans, raising them up by 26 basis points to 5.94 percent.

Late on Friday Westpac-owned St George Bank announced it planned to follow suit with the big four banks and raise its rates.

St George said property investors would see their home loan rates rise by 23 basis points while investors with interest-only loans would see their rates increase by nearly one-third of a percentage point.

Rates for owner-occupiers with interest-only mortgages would go up by eight basis points.

ANZ also raised rates on Friday.

"These changes reflect a need to closely manage our regulatory obligations, our portfolio risk and the competitive environment," said ANZ's group executive for Australia, Fred Ohlsson.

The bank's moves follows similar action from both Westpac and NAB after concerns were again raised by the banking regulator APRA about the need to rein in speculative property lending.

NAB raised its standard variable rate by 7 basis points to 5.32 percent, while investor loans jumped 25 basis points to 5.8 percent.

Westpac moved a more modest 3 basis points on its standard variable loan and 23 basis points on investor loans.

"Investors have been slapped with the biggest rate hikes so far amid growing speculation that APRA will further tighten investor lending standards in another attempt to cool down unsustainable housing prices in Sydney and Melbourne," Mozo director Kirsty Lamont said. 

Commonwealth Bank was among the nation’s banks to hit investors with surprise interest rate hikes made independently of any move in the Reserve bank’s official interest rate.

Some analysts argue rate hikes are piling more risk on to a system.

“There is clear evidence that the macro conditions for Australian house prices are deteriorating,” CLSA analyst Brian Johnson told The Australian.

“This change in sentiment is particularly worrisome, given the extent of Australian housing investors who are willing to tolerate a substantial post-tax negative carry on home loans in anticipation of a future gain,” he said.

“The expectation that house prices are no longer rising in itself could trigger correlated selling from this negative cash flow cohort.”