Westpac first major bank to lift fixed rates in two years, ends sub-5% rate

Westpac has ended its 4.99% two-year fixed-rate offer less than two months since becoming the first major bank to offer a sub-5% fixed-rate home loan this year.

It is also the first major bank in two years to lift its fixed-rates – an indication that the bank does not expect many further near-term cuts in the cash rate.

From today, the bank’s two-year fixed-rate offer will increase by 30 basis points to 5.29% under its package home loan offering.

For non-package home loan customers, the two-year fixed rate increases from 5.19% to 5.49%.

The bank’s other fixed rate products have not changed.

Westpac introduced its 4.99% offer on February 7 – a 40 basis point reduction and the bank’s lowest two-year fixed rate offering since September 2009.

The other major banks continue to offer a two-year fixed rate of 4.99% as well as a number of smaller lenders.

Loan Market corporate spokesperson Paul Smith says that after months of speculation it appears that fixed rate products have reached their lowest point and that they will rise as funding volatility and improvements in the Australian economy prompt higher fixed interest rates.

“While there remains a downward outlook on variable rates, fixed interest rates are now likely to rise and soon intersect with standard variable rates. For many home owners, the window to lock in a fixed rate that’s lower than a variable one is closing fast,” he says.

According to Smith, this is the beginning of a shift in the mortgage market as the banks and lenders react to the improvements in the domestic economy and the limited movements of the RBA.

“There’s certainly still scope for the RBA to lower the cash rate in the coming months, as some sectors are still lagging whilst others are showing steady improvement.”

“If lenders start to increase the rates of their fixed products, they’re likely not anticipating the same downward pressure from the market to drop their variable rate interest rates. We could be moving to the point in the interest rate cycle where variable rates are lower than fixed rates.”

This article first appeared on Property Observer.


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