Have Australians seen the bottom on fixed rates?

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    Commonwealth Bank hiked its three- and four-year fixed mortgage rates Friday, and analysts say more banks will soon follow suit. Fixed rates at the shorter-year duration are now starting to rise as wholesale funding costs increase, despite efforts by central banks globally to keep interest rates ultra-low.

    CBA raised its three- and four-year fixed rates by 0.05% of Friday, taking its three-year fixed rate to 2.19% and its four-year fixed rate to 2.24%, according to a report by The Australian. The hike to the three-year rate marks the first time CBA has lifted those rates since 2016.

    The hikes come after five smaller banks and non-bank lenders raised their own fixed rates in the last month, and follows CBA’s own 0.2% hike to its four-year fixed rate in March.

    The housing market has boomed over the past year as Australians have sought to lock in ultra-low rates, while the Reserve Bank of Australia has insisted it does not plan to raise the official cash rate until 2024, The Australian reported.

    CBA was the first major lender to hike its three-year fixed rate from its record low – but more banks are set to follow, according to Sally Tindall, research director at

    “The rate hikes might be small, but they point to a fixed-rate market that’s starting to rise,” Tindall told The Australian. “When CBA hiked its four-year rate in March, a flurry of lenders followed in its wake. We expect the same thing will happen with three-year rates in coming months.”

    Read more: Two more banks hike fixed rates

    Mortgage Choice CEO Susan Mitchell said that borrowers had seen the bottom for three- and four-year fixed-rate loans.

    “[But the two-year rates are still quite low, as is the one-year rate, and there’s not been a movement in the variable rate of owner-occupied,” Mitchell told The Australian.

    Shane Oliver, chief economist at AMP Capital, told the publication that bank funding costs were increasing alongside bond yields as investors, spurred by the resurgent economy, pulled money out of debt markets and poured it into risky assets including shares.

    “Earlier in the year we saw bond yields rise, and that was probably the factor in driving bank four-year fixed mortgage rates up at the time,” Oliver said. “Now that hike seems more permanent. Rates have stayed at higher levels.”

    Currently, National Australia Bank, Westpac and ANZ all offer three-year fixed rates below CBA’s new rate. The hike puts CBA’s four-year loan cost in line with ANZ, while Westpac and NAB still offer rates at 2.19%, The Australian reported.

    CBA, ANZ and Westpac are the only big banks still offering two-year fixed rates below 2%. Westpac is the last of the big four offering one-year fixed rates below 2%.

    Ryan SmithRyan Smith is currently an executive editor at Key Media, where he started as a journalist in 2013. He has since he worked his way up to managing editor and is now an executive editor. He edits content for several B2B publications across the U.S., Canada, Australia, and New Zealand. He also writes feature content for trade publications for the insurance and mortgage industries.
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