Westpac has become the first major bank this year to increase its fixed rates for owner occupiers and investors.

While the Reserve Bank of Australia is not expected to raise interest rates for at least another year, Westpac has become the first major bank this year to increase its fixed rates for owner occupiers and investors.

Westpac has increased its shorter-term fixed rates of one and two years by up to 0.10 per cent, while hiking its longer-term fixed rates of three and four years by 0.15 per cent and five years by 0.20 per cent. 

The rate hikes also encompass its subsidiaries St George, Bank of Melbourne and BankSA.

Analysis by research agency Canstar shows Westpac’s three-year fixed rate for owner occupiers has increased by almost one whole percentage point (0.96 per cent) over the past three months. 

Canstar currently lists 41 fixed rates and 61 variable rates below two per cent, which is a significant drop from three months ago when 150 fixed rates and 47 variable rates were below that mark.

Canstar’s finance expert, Steve Mickenbecker, said Westpac has the lowest variable rate of the major banks and continues to increase fixed rates.

“This is exactly the interest rate settings you would expect of a bank looking at a near-term future of a higher Reserve Bank cash rate,” he said.

“The banks are keen to attract quality business before higher interest rates dampen borrower demand, and the flexibility to reprice makes low variable rates a low-risk approach to that.”

Two per cent proving elusive

Westpac’s move comes on the back of a spike in the cost of fixed rate funding and an expectation the US Federal Reserve will lift rates faster and more aggressively than previously anticipated.

RateCity.com.au Research Director, Sally Tindall, said Westpac’s move was sure to be the first of many by Australia’s banks.

“The cost of fixed-term funding is rising with inflation in the US, hitting its fastest pace in nearly four decades,” she said.

“We expect other banks to follow within days on the back of sharp increases to the cost of wholesale funding.

“Mortgage holders who were fortunate enough to lock in a record-low fixed rate over the last couple of years are immune to these hikes, but only for the duration of their fixed rate term.

“Anyone who fixed at the start of the pandemic for two years should start thinking about what their next step might be, because when they come off their fixed rate, they’ll be looking at a very different market.”

RateCity.com.au database analysis shows a total of 17 lenders have hiked fixed rates so far this year, but that number will rise and quickly.

There are now significantly more variable rates under two per cent than fixed, with 72 variable rates under two per cent and just 40 fixed.

Mr Mickenbecker had similar advice for anyone looking to refinance.

“If borrowers haven’t already refinanced into a low-rate loan, they should now be feeling the urgency to do this,” he said.

The future likely holds higher interest rates and monthly repayments, and the time for building a buffer in readiness for that is fast running out. 

“The sharp rate for 30 per cent minimum equity loans is particularly favouring refinancers and this group should not be waiting for any further invitation.”

Lowest big four bank owner-occupier home loan rates

Rate type CBA Westpac NAB ANZ
1 yr fixed 2.54% 2.39% 2.54% 2.39%
2 yr fixed 2.69% 2.59% 2.69% 2.59%
3 yr fixed 3.14% 3.04% 3.14% 2.99%
4 yr fixed 3.34% 3.34% 3.34% 3.39%
5 yr fixed 3.59% 3.59% 3.59% 3.59%
Variable 2.29% 2.19% 2.29% 2.19%

Source: RateCity.com.au. Note: Some loan-to-value ratio requirements apply.

Lowest owner-occupier rates on RateCity.com.au

Rate type Lender Advertised rate
1yr fixed RACQ, UBank 1.79%
2yr fixed HSBC 1.88%
3yr fixed Australian Mutual Bank 1.98%
4yr fixed BankVic 2.49%
5yr fixed BankVic 2.59%
Variable Reduce Home Loans 1.77%

Source: RateCity.com.au. Note Rates are for owner-occupiers paying principal and interest, LVR requirements apply for some loans





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