Fixed mortgage rates begin to rise

Data from RateCity shows that 14 mortgage lenders have increased their four-year fixed interest rates in recent weeks, including the Commonwealth Bank and Bendigo Bank.

Meanwhile, 22 lenders have reduced their two-year fixed rates and 16 have in turn reduced their three-year fixed rates. This comes as nearly 40% per cent of new borrowers have taken up fixed interest rate loans, compared with the typical average of 10-15%:

RateCity research director Sally Tindall said low four-year fixed rates might not be around for much longer, as the RBA’s term funding facility (TFF), which has been pumping the financial sector with cheap cash, is set to end in the next two months…

“With the RBA’s term funding facility now in its final stretch and the next cash rate hike firming up for early 2024, if not before, the writing is on the wall for ultra-low four and five-year fixed rate loans,” she said.

The RBA’s TFF lends funds to commercial banks at only 0.1% – less than what state governments can borrow at. It is the primary reason why fixed mortgage rates have fallen so far below variable mortgage rates, as illustrated below:

Fixed vs variable mortgage rates

The TFF has helped drive fixed mortgage rates down.

If the TFF is withdrawn as scheduled at the end of this financial year, then commercial banks will be required to borrow funds at higher rates in money markets, thereby pushing fixed mortgage rates upwards.

My prediction is that the RBA will ‘kick the can down the road’ and extend the TFF as it won’t want to thwart Australia’s recovery by driving mortgage rates higher.

Unconventional Economist

Comments

      • Yep, no choice though I’d love to know what the end game is and how to withdraw support, not just TFF. The longer the can is kicked the bigger the snowball, the more incentive there is to keep kicking. Treasury and RBA must have modelled an exit – what on earth is it? I’d lol if it’s jubilee. Perversely apt though.

      • The can is now full of concrete
        That’ll be very painful the next time they try and kick it

    • Those fixed rates did go up
      If I’m right that 10 year and 5 year bond yields drop here, I think they’ll reduce the 4 & 5 year fixed rates again …….
      Let’s see what happens over the next month
      Don’t be surprised to hear rates are falling again
      That’ll be all over the news

  1. ChristopherMEMBER

    3 and 2 year rates down though, personally I see 3 years as the sweet spot on fixed rates – long enough to get a benefit and short enough to handle any unforeseen life changes.

  2. happy valleyMEMBER

    The RBA happy clappies will not be satisfied until they have destroyed retail depositors.

    • boomengineeringMEMBER

      That’s so old school using depositors funds to loan out. In todays world they are just an unneeded unwanted liability.

  3. It’s really interesting what Catherine Cashmore said yesterday
    Retirees are pulling money out of the bank at zero% TD and buying a property for yield WITH CASH
    I think they are pulling money out for the sharemarkets

    I think we might break through ASX 200 last year high of 7190 and start screaming through to 8,000
    Think the other half will pull their money out of the bank run into sharemarket into mid 7,000s if we see another run
    And they may lower fixed rate home loans again and the rest of the people on zero% in the bank will run to property

    Feels like there is another decent run again at everything…..maybe one last decent round …..tech shares etc

    The RBA will need some facility because there will be no money left in the bank

    • Have friends (boomers) who just went out and bought a new duplex for $600k just for the yield because they weren’t earning any bank interest. The male is nearly 70.
      The RBA has a lot to answer for by pushing these relatively unsophisticated retirees out on the risk curve. For the forseaable future their decision looks like it may pay off ….. but…

  4. Hex TexasMEMBER

    It is not fair, nor is it ethical for the government and their authorities to encourage ever increasing private personal debt, when it is blatantly obvious that it is unsustainable.
    What is the trajectory of house price growth over the next 12, 24, 36, 48, 60, 72 months. Given current interest rates and probable interest rates.
    Lets run with the forecast of say 20% this year, followed by say 15 % the following year and then what do they expect after that ? What will be the interest rates be then ? What will housing affordability be then ? What will be the true inflation rate then ?
    Can interest rates now be abandoned as they can never feasibly rise again without causing a downturn. ?
    Can the RBA keep printing money forever so the banks never require offshore funding. ?

    It is unacceptable for them to pretend that this is normal, and they are now forcing us into this high risk strategy, to support short term growth, without any exit strategy.
    Just take on more and more debt to keep the bubble inflated without any clue as to what the logical end points are.
    There can only be so many scenarios here, and from what i can see they all end in a long term correction.
    So what is the point of inviting australian mums and dads to invest in this market long term when they know it can not be sustained and maintained.
    This blog is all about markets rising and falling day in day out, you all know that this charade and fraud is unsustainable, and that Morrison, Lowe Frydenberg etc now need to be called out.
    They need to provide an explanation of how this market pans out over the next 10 years, based on their assumptions.
    It is not acceptable that they expect everyone to just blindly follow them on their zero interest rate money printing adventure on a 6 to 12 month estimate, with no explanation or substance, as to how any of this adds up.
    It has only been sustained by falling interest rates, well we all know that trend has run its course, so what is next ?
    Let’s stop with the charade and the pretence that these so called public servants know what they are doing.

    • Denis413MEMBER

      Two words… status quo. Fairness has nothing to do with it. Fairness is also about point of view.

    • Silvia Silvani

      There’s nothing fair or ethical about finance or real estate in Australia. It’s the exact reason that bcn is going to be wrong again in the coming months. Corrupt and unfair for certain people best describes Australia. Government and banks will continue to sell out to vested interests for as long as they want. The music will only stop when the banks and big players want and are safely positioned to benefit on the down.

      Bears need to stop believing anything in Australia is being done in a fair or ethical manner. All the fiddling the books early COVID proved that! Just because bears think the banks/government should act in a manner doesn’t mean they will start doing it all of a sudden.

      The game is rigged and like a casino, the house always wins.

      • Hex TexasMEMBER

        Yes Denis And Silvia, but sometimes events overwhelm and everyone loses bigtime. What i am referring to is the lack of good governance, i am not proposing the wild up and down swings which has been the australian property market over the last ten years. I am suggesting a slow and steady approach, with appropriate metrics not a fake boom based on RBA money printing and contrived interest rates, which invites a collapse or a severe correction.

        • This government has relied on a lack of good governance and ethics since 2013.

          The LNP have resisted all calls for an independent crime and corruption authority for years and will continue to do so. The only people who are doing the right thing are voters and it is costing us every single day.

      • If I were the boomer with 600k sitting idle I’d whack it into funeral industry..plenty folk gonna die by misadventure, bridge pylon accident, 303, rope, seated in 50-300k SUV or prestige vehicle etc when rug is pulled from under their feet for the ‘great re set you toob nutters bang on about…they think it’s a cataclysmic mud/dum flood, aliens landing, laser weaponry etc when all it takes is fiddling with banks & $ bulldoze heap of old buildings or update facade & et voila ‘ new millennium, new Dawn, new world out of order..NWO NWA WHO PC NPC et al love acronyms

    • Don’t worry about 10 years
      The landscape will be very different in Q4
      The things you are talking about won’t be a concern

    • Well said though timeframe needs expanding to term (multi decade) not just 10 years. Your post is what I was alluding to above ^, hence the jubilee being perversely appropriate.

  5. working class hamMEMBER

    Is it even a bubble anymore?
    Cbd salaries have been driving regional prices with investment properties for the last 15 years. The WFH crowd are now supercharging regions with lifestyle PPOR purchases, whilst hedging bets with the 6 year capital gains exemption.
    With so many people owning at least 1x investment property that has recently increased in value and rental returns, income has increased for a large group without even working. Not to mention the Govt subsidies for the equivalent of washing your hands.
    The way that regional/coastal Australia has been booming is only really the flow on affect from inner city equity finding cheaper effective ways to invest, avoid land tax, secure Covid free bolt holes, holiday homes etc.
    I just feel that this is the new normal, Syd and Melb has had to deal with it for years, it has now just become a national problem.

  6. When I lived on the Sunshine coast, I would frequently see people sell the big house in Melbourne or Sydney and move into another big house on the coast for half the price.

    They would have a bit of cash in the bank, a spouse they didn’t really know, kids who said they would visit but didn’t and to top it all off, they had left their friend circle that they had spent 30+ years developing. After rattling around in a big empty house for two years they would generally move “back home”

    Real estate agents saw it all the time and were the first to point it out to me.

    I can see this happening with the WFH crowd. The isolation will get to them and I think the promotions are more like to be given to someone the boss sees every day, rather than on Zoom. So the WFH are less likely to get moved up and eventually have a lower income.

    I suspect late 2022 and 2023 will see a lot of people leaving the regions to return to the city’s.