'Trump effect' begins to bite borrowers as fixed-rate mortgages increase

'Trump effect' begins to bite borrowers as fixed-rate mortgages increase
'Trump effect' begins to bite borrowers as fixed-rate mortgages increase

The nation's biggest non-bank lender, Firstmac, and nine other lenders are raising fixed rate mortgages in a move known as the 'Trump effect,' according to lenders and market analysts.

These mortgages are being raised by up to 45 basis points.

Firstmac's rates for owner-occupiers and investors on one to three-year mortgages by 13 basis points.

Owner-occupied rates have increased to 4.09 percent and investor rates to 4.34 percent.

"International funding costs are rising, which is the fallout from the 'Trump effect'," Martin North, principal of Digital Finance Analytics, told The Australian Financial Review.

"Other lenders are likely to follow," he said.  

"I am expecting rises in mortgage rates over the summer."

"If the US do turn on the debt tap to fund infrastructure builds, this is likely to drive rates up.

"I know the banks have more deposit funding now, but they are still caught in the draft of international rate movements." 

Marnie Mortimer, managing director of loans.com.au said that global markets are set to change.

"There is no doubt global markets are pricing in a rise in rates in the medium-term and that has now been aggravated by expectations of higher inflation if Mr Trump implements his election promises," she to the Australian Financial Review.

It comes as for the first time in two years, the markets are betting that the RBA is more likely to lift rates than lower them next year.

Index swaps are pricing in an about 8 per cent chance that over the next 12 months the cash rate will rise from its current record low of 1.5 per cent, according to Credit Suisse data.

Loans.com.au had cut its three year fixed-rate home loan by 32 basis point to 3.67 percent in June.

This week the lender increased its three-year rate to 3.89 percent.  

P&N Bank, the largest member-owned bank in Western Australia, has raised rates on its products by 10 basis points.

Catalyst Money increased its fixed rates by up to 30 basis points, Bank of Queensland's three-year owner-occupied and investment loans went up by up to 20 basis points and Beyond Bank by 10 basis point.

Westpac, which has about $380 billion in mortgages, is cutting the introductory discount rate on its popular "flexi first" owner-occupier and investment products by 10 basis points. 

Loans.com.au, the nation's largest online lender, has raised rates by up to 13 basis point on investor and owner-occupied fixed rates.


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