CBA fattens margins across the board

Commonwealth Bank yesterday set the agenda for the round of interest rate rises on retail lending products. CBA yesterday said it would lift interest rates on home loans by 30 basis points.

This is the rise in the RBA cash rate of 25 basis points plus five basis points to catch up for January's decision-making weakness by CBA, when NAB lifted rates 12 basis points and ANZ 20 basis points and the market median was 15 basis points.

No other significant lenders have made interest rate changes yet. The Herald Sun reported that Westpac and National Australia Bank are considering proposals to raise mortgage rates by as much as 0.35 percentage points. The Financial Review reported that St George Bank had advised brokers it would lift rates by 25 basis points.

CBA also lifted variable rates on business loans by 30 basis points, continuing a trend for banks to stretch margins on business loans throughout the period of the recent hikes in official rates and the elevated funding costs related to the liquidity crunch.

There's a predictable flap about CBA's decisions, in particular from the new Labor government, but only in relation to home loan interest rates. The extra margin on business interest rates doesn't seem to be controversial.