Westpac pulled the country’s lowest four-year mortgage off the market, which could spell the end of historically low rates.
The country’s second-largest bank raised its four- and five-year fixed rates by 30 basis points, ending its market leading position of 1.89 percent for four-year fixed mortgages.
Westpac’s new rate now stands at 2.19% for a fixed four-year rate, while the five-year rate has been raised to 2.49%.
The rate cuts took place in the group’s subsidiaries, notably St George, Bank of Melbourne and BankSA.
Its move follows a controversial decision by 14 other Commonwealth Bank lenders to raise long-term rates.
NAB is the only lender among the Big Four to offer a four-year rate below 2 percent.
The rate hike was partly triggered by the Reserve Bank, which forecast an increase in the official cash rate in three years.
RateCity’s research director Sally Tindall said it was only a matter of time before the big banks hiked their rates.
“Westpac has held up for as long as it can, but with a hike in cash rates on the line in 2024 and the RBA’s term finance facility ending in a few months, the record four-year fixed rate of the bank was unsustainable, ”she said.
“While the majority of the banks’ three-year fixed rate changes are still cuts, rather than hikes, the tide could reverse later this year as the economy continues to recover.
The RBA Term Finance Facility was set up to allow the banking sector to access additional financing to help reduce the pressure on the prices of loans to businesses and households.
This was an additional program in conjunction with the RBA lowering the official cash rate to 0.1 percent in November of last year.
Low mortgage rates of less than 2% were triggered by the three interest rate cuts in 2020.
Ms Tindall noted that the cost of RBA funding for the banking sector is likely to increase in the coming years as the economy rebounds from the COVID-19 pandemic.
“The cost of financing is likely to increase, so it’s no surprise that lenders are starting to take this into account,” she said.
“If you are looking to correct your rate and haven’t done so yet, don’t panic. There are still many competitive fixed rates in the market. “
BankVic offers the lowest four-year fixed rate in the market at 1.95%, while Reduce Home Loans advertises the lowest floating rate at 1.77%.
The RBA has signaled that current policy parameters are expected to remain in place while inflation and wage growth remain below its target range of 2-3 percent.