Any doubts that the best was over for fixed-rate mortgages was allayed last week when Commonwealth Bank raised its long-term fixed rates – a move quickly matched by Westpac.
The ABC cut the interest rate on its lowest variable rate mortgages by 0.4 percentage points – to 2.29% – but only for new customers with a deposit of at least 30%. It also reduced its 1-year fixed rate.
Lenders continue to increase their fixed rate mortgage interest rates while reducing their variable rates for new customersCredit:James Alcock
These measures indicate that Australia’s largest banks expect their funding costs to rise over the next two years, although the Reserve Bank of Australia (RBA) has repeatedly said that it does not expect to start. increase the cash rate before 2024, at the earliest.
“These fixed rate hikes suggest that the days of ultra-cheap financing may be numbered,” says Sally Tindall, research director at RateCity.
“As the RBA insists the next rate hike won’t happen until at least 2024, banks anticipate an increase in the cost of funding once borders reopen and the economy rebounds,” she said.
There has been a sharp rise in inflationary expectations, with consumers planning to demand higher wages and businesses raising the prices of their products and services.
With the end of the latest lockdown in NSW and the resumption of international travel from November 1, spending in cafes, restaurants, retail outlets and airlines is expected to increase.
With Victoria likely not far behind NSW in openness, banks are likely to have to pay higher interest rates to attract savings.
Most of the lenders’ rate cuts in recent months have been on their variable interest rates and one-year fixed terms, with higher rates on their 2-, 3-, 4- and 5-year mortgages.
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