ABC pulls the pin on rates below 2%

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It appears banks are fighting to raise fixed rates, with CBA now increasing for the second time in just over three weeks.

Australia’s largest bank followed Westpac, which yesterday raised fixed rates for the second time in just over two weeks.

Today, the CBA has raised its fixed rates from 1 to 5 years up to 0.50% for homeowners and investors.

This means the ABC now has no advertised mortgage rates below 2 percent for the first time in nearly a year.

Current CBA Fixed Rate Changes for Homeowners

To lend Old rate New rate Switch Monthly repayments – difference, loan of $ 500,000
1 year fixed

1.99%

2.34%

0.35%

$ 89

2 years fixed

2.09%

2.34%

0.25%

$ 64

3 years fixed

2.29%

2.69%

0.40%

$ 104

4 years fixed

2.39%

2.89%

0.50%

$ 131

5 years fixed

2.99%

3.09%

0.10%

$ 27

Note: The above rates are for homeowners paying principal and interest on a package with an annual fee of $ 395. Monthly repayments are based on a $ 500,000 30-year fixed rate loan.

Banks rush to raise fixed rates as funding costs rise

Analysis of the RateCity.com.au database shows that a total of 33 lenders increased at least one fixed rate last month.

Four lenders increased their fixed rates twice last month: CBA, Westpac, AMP and BDCU Alliance Bank. This list is likely to grow.

Lenders who have changed at least one rate in the past month (Oct 6 to Nov 5, 2021)

Lenders who cut Lenders who have increased
Variable 28 2
1 year fixed 12 8
2 years fixed 3 20
3 years fixed 2 29
4 years fixed 0 22
5 years fixed 1 27

Source: RateCity.com.au

RateCity.com.au Research Director Sally Tindall said: “Fixed rate hikes are accelerating and intensifying as we move forward.”

“Anyone who is fixing their rate with Australia’s biggest bank and hasn’t paid a rate lock-in fee will be kicked this morning,” she said.

“This latest round of CBA hikes is more than just an adjustment, with increases of up to 0.50% on some fixed rates.

“The mortgage market is changing and it’s happening faster than expected. The speed at which global economies are improving has driven up the cost of purchasing funds, prompting banks to raise fixed rates.

“Australia’s two biggest banks hiked their fixed rates this week and we expect the four big rival banks NAB and ANZ to follow suit in a few days, along with a flurry of other lenders.

“CBA has abandoned its efforts to keep at least one fixed rate below 2%. While a rate starting with a “1” was a great marketing tool, it was clearly unsustainable for the bank.

“Despite yesterday’s hikes, Westpac still has two fixed rates below 2%, however, in this climate it’s hard to see those rates stay much longer,” she said.

Scenario: How New CBA Customers May Have Been Affected

Analysis from RateCity.com.au shows that a customer who is currently asking for a 3-year fixed rate of $ 500,000 over 3 years with CBA, could potentially pay an additional $ 5,503 over the term of the fixed rate if they did not block not its rate.

In this scenario, the borrower would have been better off paying the CBA rate blocking fee of $ 375. However, this only applies if the rates increase during the application process.

Amount of the loan

Cost of the loan over 3 years (2.29%) + rate blocking fees

Cost of the loan over 3 years (2.69%)

Difference

$ 500,000

$ 33,537

$ 39,040

$ 5,503

$ 1 million

$ 66,698

$ 78,079

$ 11,381

Source: RateCity.com.au Notes: Based on owner-occupant paying principal and interest, taking out a 3-year fixed rate loan with CBA. The cost includes interest plus the rate blocking fee in the case of the person blocking their rate. Does not include other costs. The CBA rate blocking fee is currently $ 375.

ABC home loan rates then and now

term of the loan 6 months ago Today Difference
1 year fixed

2.09%

2.34%

0.25%

2 years fixed

1.94%

2.34%

0.40%

3 years fixed

2.14%

2.69%

0.55%

4 years fixed

2.19%

2.89%

0.70%

5 years fixed

2.99%

3.09%

0.10%

Source: RateCity.com.au. Note: 6 months ago was May 5, 2021. Rates are for homeowners paying principal and interest on a lump sum loan.

The Big Four Banks’ Lowest Rates for Homeowner Home Loans

ABC Westpac NAB ANZ
1 year fixed

2.34%

1.99%

1.99%

1.99%

2 years fixed

2.34%

1.99%

2.09%

2.09%

3 years fixed

2.69%

2.29%

2.28%

2.39%

4 years fixed

2.89%

2.69%

2.59%

2.69%

5 years fixed

3.09%

2.99%

2.99%

2.89%

Variable

2.29%

1.99% for 2 years then 2.49%

2.29%

2.72%

Source: RateCity.com.au. Note: CBA and Westpac rates correspond to a loan-to-value ratio of up to 70%.

Lowest rates from RateCity.com.au database

Lender Announced price
1 year fixed Big Bank, Bank of Us

1.59%

2 years fixed Big Bank

1.59%

3 years fixed Community First Credit Union

1.79%

4 years fixed Freedom loan

2.27%

5 years fixed Freedom loan

2.27%

Variable Reduce home loans

1.77%

Source: RateCity.com.au Note: Rates apply to owner-occupiers who pay principal and interest. Certain LVR and localization requirements apply.


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