Fixed rate mortgages rising

From Banking Day:

One thing that has kept borrowers interested in the mortgage market of late has been the keen pricing of fixed-rate loans. Through much of the September and December quarters last year, lenders followed the swap curve down and competed aggressively in making cuts to fixed rates.

The cycle turned in January when longer term swap rates started to move up. Since then fixed mortgage rates have been rising.

Whether borrowers continue to see fixed rates as a bargain and, therefore, a reason to refinance will be something lenders will watch with interest.

One of the most aggressive fixed-rate lenders, Citibank, started the year with a three-year rate of 5.75 per cent. It increased its three-year rate twice in February and once in March and is now offering 6.25 per cent for three years.

ANZ, whose mortgage book has been growing well above system this year, cut its three-year rate by 15 basis points to 6.14 per cent early in February, but since then it has increased its rate twice and is now offering 6.48 per cent for three years.

According to Infochoice, one-year fixed rates have increased by an average of five basis points since the start of the year. Three-year rates have increased by an average of 10 basis points and five-year rates by four points.

The averages mask much bigger movements by some lenders. Bankwest’s three-year rate has gone up by 50 basis points since January.’s rate has risen by 45 points, Homeloans’ rate by 45 points, ING Direct’s rate by 40 points, Heritage Bank’s rate by 34 points and Suncorp’s rate by 30 points.

The movement is not all one way, however. HSBC, CUA and ME Bank have cut their fixed rates this year.

David Llewellyn-Smith
Latest posts by David Llewellyn-Smith (see all)


  1. A question to all & sundry – if and when interest rates fall to say 3.5% because of a GFC 2, do you think this will send the property heading north again at a great pace, similar to after the 2008 stimulus? I ask, because it seems from opinion that all that is needed for great increases in real estate again, is for the interest rates to fall, fairly dramatically or do you think that Australian’s now have a different attitude, with too much debt and they want to pay down the sucker?

    • It will give it a little kick Neil but property won’t boom again until the debt has been reduced in real terms, and that will take some years.

      The market doesn’t have the capacity to expand the level of lending to anywhere near the same degree as it has over the past two decades.

      I think that your last option of paying down debt will be the main scenario for most householders.

    • TheRedEconomistMEMBER

      If you believe the property types and retailers, a drop in rates is seen as the panacea for there woes. Me thinks they need to look more closely at there own practices and see if they can make more competitive offerings. I just hope that with a election around the corner, that there is no more increase in First home buyers grants or any more middle class welfare. This is what happened after the GFC, when first home buyer grant were increased and the property correction can was kicked down the road.
      I am looking forward to the budget. I am hoping that there is some sort of reduction of negative gearing benefits for established housing. Negative gearing should only applicable to new housing. All and sundry has us believe we are not building enough. So lets make building new housing attractive and not have investors crowding out families from buying there own place. (I do not see rates heading 3.5%)

      • Thanks Peter & RE – I agree with your assessments; it is just if equities tank, the investors may park their money in Houses again – you know, safe as houses…….you cannot discount irrational behaviour.

        • Neil – equities have already tanked – there probably is a lot of money on the sidelines, but money managers won’t put money into residential. Perhaps retirement homes and aged facilities etc, but not everyday residential, and the small investors are happy to leave it in cash for the moment.

          That’s just my opinion of course, and others may know more than I do. If you’re looking to buy a house, then I suggest that you do not rush in, and be prepared to walk away if the offer doesn’t suit you. It’s a buyers market in most areas (some variation depending on the area)so make the most of that situation, although I do expect it to last for a few years.

          It’s almost impossible to pick the market bottom, so when you do buy just enjoy your house and forget about economics for a few years.

  2. As RBA Luci Ellis kindly points out from Atlanta yesterday:

    “Paying your mortgage down before the bust is the most effective way of avoiding getting into negative equity once housing prices start to fall.”

    Don’t Buy Now!

  3. I’ve begun reading the MSM stuff around my local area – finding it fascinating that the advice from RE agents et al is not to fix the mortgage, because this is the bottom of the cycle……….

    • I remember reading once a good study showing that you cannot beat a bank. I.e. Fixing your home loan over the long term is more expensive than staying on a variable rate.

      I can’t remember where I read that – I have seen some friends panic a couple of years ago and fix…they are still hurting now.

      • If they based the study on what the majority are doing then no doubt it looks like you can’t beat the banks… I’d think that most who fix do so as interest rates rise incase they rise too far when instead they should be looking to lock in at the bottom. At the bottom most are probably just enjoying the extra cash in their pocket rather than wondering why it’s there and what they can do to preserve the lower rates.

        When I had a mortgage I fixed in early 2009 almost at the bottom of the cycle (banks started to increase them before the RBA). It’s doable.

        I don’t think we’re at the bottom yet.

      • you can beat the banks on interest rates if you watch the same thing they watch… yeilds.

        the banks price their mortgages from the bond yield and set their fixed rates accordingly. they bet on the average mortage holder being too stupid to even know what a bond yeild is. a pretty safe bet.

        bond yeilds are falling becuase the economy is about to tank. as the economy tanks interest rates get slashed.

        the banks offer what look like very attractive fixed rates compared to current variable rates to lure unsupecting borrows to fix (at the top). As interest rates get slashed these fixed rates look like the dud deals that they always were but borrowers are now locked in paying higher fixed rates than the variable rates and this is how they make money. you dont fix at the beggining of an economic downturn you fix towards the end of it. thats how you beat the banks on interest rates.

      • Like I tell most people – normally when interest rates are low is the time when most people are in fear about the economy’s health, layoff’s are happening, etc. If you take fixed you have no cushion from the RBA when things turn sour.

        Better to have higher rates when you can afford them (i.e the good times).

    • Some retards probably do believe that we are on the cusp of another boom / leg up.

      Deluded fools!

  4. I fixed 2 months ago at 12 months and 3 years. Main issue is variable income at least I know my payments. At that stage the fixed rate was still a significant discount to the variable. I agree however that rates are likly to drop but not sure of the picture in 3 years time if the no foreign money is coming into the country or our dollar has collapsed.

  5. I signed up for a 5yr in Canada @3.91% thinking rates couldn’t get any lower. You can now get one nearly a full percentage point lower!

    • Insight Wealth

      It’s an interesting comparison, Rupert. Unfortunately most Australians don’t have an appreciation of debt markets outside of our domestic retail banking sector (and I would have as a guess the trend is global), nor do they understand the reasons for why there is not a global ‘normal’. For most borrowers here around 7% is pretty ‘standard’, though most would accept 7.5%+ (over mid term) as being pretty normal.

      Given the pricing of our domestic residential property market AND interest rates the property ‘boom’ is not only unsustainable, but destined to fail. Meanwhile real estate agents propagate the rhetoric of eternal double-digit-plus-CPI capital growth (unfortunately the concept of affordability and the economic impossibility of this scenario seems to be lost on most)

  6. The banking cartel has a wonderful thing called the Standard Variable Rate …. price fixing in other countries

  7. I fixed 50% at 5.95% for 3 years. Historically very good fixed rates. Even if rates do get slashed how much is going to be passed on by the banks ??

  8. I recall reading a piece of research about fixed v floating in the UK, and it concluded there was no 25 year period where you were better off having a fixed rather than floating mortgage. Unfortunately I can’t seem to find it online.

  9. Do business or agricultural loans tend to be raised/lowered in lockstep with residential loans? Or do the banks tend to resist changing the rates compared to residential loan rates?