Big four banks lift rates, startle the market

A lifting of fixed-term mortgage rates by the big four banks has startled the market.

Pre-empting the Reserve Bank’s regular monthly meeting next Tuesday, the Commonwealth Bank, NAB, ANZ and Westpac each raised some of their rates, possibly in response to higher borrowing costs on the wholesale market.

The Commonwealth’s three-year fixed term rate remains steady at 5.09%, while its four-year fixed rate rose 0.20% to 5.74% and its five-year fixed rate also rose 0.20% to 5.84%.

Westpac’s three-year term rose yesterday from 4.99% to 5.19% while its four-year fixed rate is steady at 5.49% and its five-year fixed rate is also steady at 5.79%.

National Australia Bank lifted its fixed term rates on Monday: Three years fixed rose 0.20% to 5.19%; four-years fixed is steady at 5.64% and five-years fixed rose 0.24% to 5.79%.

The ANZ raised its three-year fixed rate from 5.14% to 5.34% on Friday. It did not change its four or five-year fixed rates. A staffer said rates "could go up or down depending on what’s going on in the market".

Neither IngDirect, Bankwest, St George or UBank had made any changes, staffmembers said.

Buyer’s advocate Todd Hunter, of the wHere Group, said he had put out a notice to alert his clients to the rises, which may have been prompted by the banks "Probably not being able to find money as cheap anymore".

"This is probably the right time to fix," he added, saying rates – even after the rises – are "still looking very attractive". He recently locked in his loans at 4.99%.

"Money is still cheap and anything under 5.5% is extremely low and you’ll be doing well."

Although he "can’t foresee any dramatic movements in the variable rate", Hunter admitted he is not sure what the market is going to do next. "It’s safer to wait until after Tuesday’s meeting. But if the big four go up it’s a sure bet the smaller banks and building societies will follow."

One thing’s for sure, if the Reserve Bank on Tuesday does cut mortgage rates, the banks which raised their rates will look greedy, even though fixed rates are usually higher than variable rates.

Hunter said average variable rates over the past 10-15 years were in the mid-sixes "although there have been plenty of ups and downs in the meantime".

One reason the Reserve Bank may hold rates is concern over unemployment, currently sitting at 5.6%  according to the Australian Bureau of Statistics. The participation rate, which is the proportion of people in work or looking for work, fell to 64.9%, the lowest level since November 2006.        

Jessica Darnborough, of Mortgage Choice, said she expected a few more rate movements across the board but "only slightly" and not in November.

"The yield curve was at historic lows recently but it’s now on the way back up so we may see more movements in the fixed arena."

Although not into "crystal ball gazing" Darnborough said she would be surprised if the RBA raised rates on Tuesday. However, fixed rates are affected by other external factors and she sees a "little bit of a trend" for upward movements in that category.

Optimistically, she said: "The banks are still competing for market share, so we may see downward movements against trend."

The banks’ three-year fixed term is said to be the most popular.