ANZ increases fixed-rate home loans as big four banks protect profit margins

ANZ Bank raised fixed rates for its home loan customers, joining the other “big four” banks in protecting profit margins ahead of impending interest rate margins.

The country’s fourth-largest bank this morning raised the rate on its three-, four- and five-year fixed-term loans by 0.40% for homeowners paying principal and interest on a flat rate.

A customer on a five-year fixed-term loan will see their old rate of 3.59% drop to 3.99%, an actual repayment difference on a $500,000 loan of about $114.

ANZ joined the other four big banks in raising fixed rates. (PAA) research director Sally Tindall said ANZ’s rise brings it in line with the other four big banks, all of which raised their fixed rates in 2022.

“ANZ’s rises are not a surprise. The cost of funding is rising and that is impacting the bank’s profit margins,” Ms Tindall said.

“The big banks are in a tricky position. They still want to drive out the competition, but the rising cost of funding makes it impossible to offer low fixed rates.”

With interest rate hikes looming, many borrowers want to lock in a fixed rate. (Peter Rae)

Ms Tindall said today’s rises reverse the market offer that ANZ offered at the height of the housing boom.

“ANZ previously had some of the most competitive homeowner fixed rates from the big four banks, but today’s increases put them at the bottom of the pack,” she said.

“The majority of variable rate changes are still cuts, but this trend is beginning to slow. Year-to-date, 15 lenders have cut at least one variable rate, however, eight banks have increased.

“We expect this trend to reverse as we get closer to the next cash rate hike.”

The RBA maintained interest rates.
Many expect the RBA to raise interest rates at the end of 2022. (PAA)
The exact timing of this rate hike remains uncertain, with RBA Governor Philip Lowe saying that a cash rate hike in 2022 was “plausible” but not certain.

“With our view of the rate hikes ahead, we now expect the turnaround in house prices to occur in the second half of 2022,” the NAB economists wrote.

“It sees a flatter result in 2022 and a slightly bigger drop in 2023.

“Overall, we see house prices rising by around 3% in 2022 before falling by around 10% in 2023.”

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