Commonwealth Bank (ASX:CBA) hikes interest rates. Is the RBA wrong?

CommBank has just lifted interest rates on its fixed-loan products.

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The Commonwealth Bank of Australia (ASX: CBA) share price is a little rocky today. CBA shares opened well down on yesterday’s close, but have slightly recovered since and are trading at $98.02 at the time of writing, down 0.39% for the day.

But that’s not the biggest news for CBA shares today. According to a report from news.com.au, Commonwealth Bank has just given its homeowners an interest rate hike.

Most of us pay attention when the Reserve Bank of Australia (RBA) raises or lowers the official cash rate. But banks can raise or lower their own rates independently of the RBA. And that is what has happened today.

According to the report, CommBank has raised its interest rates on 3 and 4-year fixed-term loans – by 5 basis points for owner-occupiers, and by 10 basis points for investment loans.

This makes CBA the first of the big four banks to move in this way. RateCity research director Sally Tindall was quoted as stating the following:

When CBA hiked its 4-year rate in March, a flurry of lenders followed in its wake… We expect the same thing will happen with 3-year rates in the coming months.

What does CBA’s rate hike mean?

If you’ve got a fixed loan with National Australia Bank Ltd (ASX: NAB), Westpac Banking Corp (ASX: WBC) or Australia and New Zealand Banking GrpLtd (ASX: ANZ), you might want to keep an eye on your lender.

The RBA has not made any moves in terms of interest rates since it slashed the cash rate to its current level (and all-time low) of 0.1% last year. That was in response to the coronavirus pandemic, of course. What’s more, the RBA has repeatedly asserted that it doesn’t foresee rates changing until 2024.

It has made such a move dependent on inflation rising and staying at 2-3%, as well as the economy reaching full employment seeing strong wages growth.

So that makes this move by Commonwealth Bank today very interesting. It implies the bank doesn’t quite see the RBA’s stated course as gospel. If the RBA was to raise rates sooner than 2024, it would make CBA’s fixed-rate loans a drag on the bank’s profitability. So CBA is arguably moving ahead of the curve here – and showing its hand on what it thinks of the RBA’s commitment as well.

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Motley Fool contributor Sebastian Bowen owns shares of National Australia Bank Limited. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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