Westpac increased fixed home loan rates for three, four and five-year terms yesterday, in line with a recent round of fixed rate rises in response to higher bond yields and swap rates.
Westpac increased its three-year rate by 21 basis points for owner occupiers paying principal and interest and by 20 bps for investors. It increased its four and five-year rates by 10 bps for owner occupiers and investors.
Subsidiary brands St George, BankSA and Bank of Melbourne also announced rate increases.
This is the second increase in Westpac’s fixed home loan rates in a month. It has maintained low one and two-year rates – both 1.99 per cent.
Banks are repositioning their mortgage rates as the supply of cheap medium and long-term money dries up.
Earlier this week, the Reserve Bank abandoned its formal target of 10 bps for the three-year bond rate. The three-year bond rate jumped to 1.17 per cent in late October before settling back to its current level around 90 bps.
Having promoted low fixed rates for much of this year, banks are raising longer-term fixed rates, holding one and two-year rates steady and continuing to cut variable rates.
In October, Bendigo Bank, Commonwealth Bank, ING, NAB and UBank cut variable rates. In some cases those cuts were targeted at borrowers with loan-to-valuation ratios below 80 per cent or even 70 per cent.
Commonwealth Bank borrowers pay a variable rate of 2.29 per cent if their LVR is 70 per cent or less, while borrowers pay 2.39 per cent if they have an LVR up to 80 per cent.
In the fixed rate segment, ANZ cut its one-ear rate while increasing its three and five-year rates.
Commonwealth Bank and NAB did something similar, cutting their one-year rates and increasing longer rates.
All four big banks are offering 1.99 per cent for one year and three are offering 2.09 per cent for two years (Westpac’s two-year rate is 1.99 per cent).
The lowest fixed rate in the market is 1.59 per cent, which Bank of us and Greater Bank are offering for one year and Greater Bank is offering for two tears.
The lowest variable rate is 1.88 per cent, which Reduce Home Loans is offering for owner occupiers with LVRs up to 80 per cent.