The big four lift fixed rates
As borrowers and brokers brace for further rises to variable home loan rates, fixed home loan rates have been rising over the last couple of weeks.
The RBA hiked the cash rate by half-a-percentage point on Tuesday, taking it to 1.35%. Marking the third consecutive rise this year, the official cash rate is at the highest level since May 2019.
On Wednesday, CBA was the first of the big four banks to announce increases to its variable home loan rates, confirming all variable rates would increase by 0.50% from 15 July. The move was followed by ANZ, NAB, and Westpac each announcing their variable rates would also go up by 0.50%.
Read more: RBA goes hard on interest rates
Fixed home loan rates, which largely reflect market rates (including market sentiment), started to rise towards the second half of 2021.
Major banks ANZ, CBA, NAB and Macquarie Bank, have each increased their fixed home loan rates over the last two weeks.
ANZ fixed home loan rates increased by 0.90% on 22 June. Effective 27 June, Macquarie Bank raised its fixed home loan rates between 1.10% and 1.66%.
On 30 June, Australia’s biggest bank, CBA, increased all fixed home loan rates by 1.40%. The following day, NAB increased its three-year, four-year and five-year fixed rates by 0.80% and its one-year and two-year rates by 1.10% and 1%.
Asked about the rationale and timing of the 1.40% rise in fixed home loan rates, a CBA spokesperson told MPA the changes reflected increased costs and market conditions.
“We have increased the life of loan discount across our extra owner occupied and extra investor home loan. We have also made some changes to our fixed rates following increases in funding costs and as a result of current market conditions,” the CBA spokesperson said.
In a rising interest rate environment, CBA said it was important that customers were made aware of the support available to them.
“We understand our customers are facing rising cost of living pressures. To help them save money and reduce their expenses they can access exclusive deals through our partners, like More Telecom,” the CBA spokesperson said.
CBA customers with a fixed rate home loan could make additional repayments of up to $10,000 per year to save interest on the life of their loan, the bank confirmed.
For customers considering a fixed rate, CBA’s rate lock option enabled a rate to be locked in upon receipt of the rate lock form, providing rate certainty.
To help customers manage their home loan, CBA said it provided a range of resources, such as a budget planner tool, to help borrowers to manage their income and expenses.
For owner-occupiers paying principal and interest, on Wednesday, CBA’s fixed home rates are 4.99% (one-year fixed), 5.79% (two-year fixed), 6.39% (three-year fixed), and 6.59% and 6.69% (four-year and five-year fixed).
For the CBA Extra Owner Occupied Home Loan (LVR less than 70%), the annual life of loan discount is 2.79%. For LVR 70.01% to 80%, the annual discount is 2.89%, and for LVR over 80%, the annual discount is 3.74% (unchanged).
On Wednesday, NAB fixed rates are 4.69% (one-year fixed), 5.59% (two-year fixed), 5.79% (three-year fixed), 6.19% (four-year fixed) and 6.29% (five-year fixed).
Confirming 33 lenders increased their fixed home loan rates over the last week, RateCity research director Sally Tindall (pictured below) said as fixed rates across the big four banks are now “sky high”, there’s likely to be a bigger drop in the number of borrowers opting for fixed rates.
“In the latest ABS data, the proportion of new fixed rate lending plummeted to just 12% of all new lending in May, and we expect it to drop even further in coming months,” Tindall said.
She said rises across both fixed and variable home loan rates made it even more important for borrowers find the best option for their needs.
“Rates might be on the rise across fixed and variable mortgages, but banks are still falling over themselves to offer up perks and discounts to homeowners willing to switch,” Tindall said.
Across the big four banks on Wednesday, for owner-occupiers paying principal and interest, the lowest fixed home loan rates were available through Westpac.
