The Commonwealth Bank (ASX: CBA) has reduced interest rates for one and three-year fixed interest rate home loans by 0.16 percent.

The new interest rates will be available for September on new one and three year fixed rate package home loan borrowings over $150,000.

Ross McEwan, Group Executive Retail Banking Services at Commonwealth Bank said: “We believe in this environment customers are looking for certainty with their home loan repayments.

“For new borrowings we believe these rates are one of the market’s most competitive,” he said.

The rate will be effective Wednesday, 7 September 2011.

Commbank’s move comes a day after Westpac announced its subsidiary brands, St. George, BankSA and Bank of Melbourne have cut two-year fixed rates on their package products by 15bps to 6.44 per cent, and reduced their three-year rate 5bps to 6.54 per cent effective on Tuesday 6 September.

However, borrower interest in the products has increased only modestly despite the cuts. August Mortgage Choice data show demand for fixed rates increased a mere 0.8 per cent for the month, accounting for 14.1 per cent of the broker's approvals.