Westpac Raises Rates on Fixed-Rate Home Loans, Marking the End of Super-Cheap Financing

Westpac is the latest major bank to raise its fixed home loan rates, prompting experts to warn that the days of ultra-low home finance are numbered.

The bank announced today that it will increase its fixed rates to two, three, four and five years by 0.10% for new owner-occupied loans that pay off principal and interest.

This follows in the footsteps of the ABC, which hiked its two-, three- and four-year fixed rates by the same amount last Friday.

Westpac is the latest of the Big Four to increase fixed mortgage rates. (Provided)

RateCity.com.au research director Sally Tindall said big banks expect loans to become more expensive, despite the lack of early indicators from the Reserve Bank of Australia (RBA).

As the RBA insists the next cash rate hike will not happen until at least 2024, banks are predicting an increase in the cost of funding once borders reopen and the economy will rebound, ”Ms. Tindall said.

“While Westpac’s fixed rate hikes today are relatively small, people waiting for a home loan who haven’t locked in their rate will understandably be annoyed.”

The above rates are for homeowners who pay principal and interest on a flat rate with an annual fee of $ 395 for a loan-to-value ratio of 70 percent or less. (RateCity.com.au)

Ms Tindall said better deals always exist in the market, but borrowers will need to shop around.

“Westpac has kept its fixed one- and two-year rates below 2% for homeowners paying principal and interest to remain competitive in a market where refinancing is at record levels,” said Ms. Tindall.

“While the writing may be on the wall for fixed rates, the party is not over yet – there are still 154 fixed rates below 2%.”

A crowded auction in Sydney ahead of the current COVID-19 lockdown. (Pierre Rae)

Canstar financial expert Steve Mickenbecker said it was only a matter of time before the whole market moved to higher rates.

“Lenders are scrambling to raise fixed rates before they start to feel the squeeze in margins,” Mickenbecker said.

“The recent upward trend in fixed rates reinforces the fact that markets anticipate interest rate hikes for some time in 2023. The emergence of global inflation for the first time in years is a clear signal a shorter horizon towards higher rates at all levels. “

Borrowers are advised to constantly seek a better deal for their home loan. (PAA)

He thinks the biggest danger for borrowers is resting on their laurels and not looking for the best deal.

“Borrowers shouldn’t be as complacent as they should expect increases in two years, and the closer they get to that point, the less attractive the fixed-rate alternative will be,” Mickenbecker said. .

“They might want to consider fixing their interest rate for three years or more, while things are still good.”

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