Big four join interest rate price war – but rates are rising for the longer term
Commonwealth Bank (CBA) has made its long-awaited entry into Australia’s ongoing interest rate price war, slashing their two-year fixed rate by 20 points to 1.94%.
That places them below the 2% marker for the first time in the history of Australia’s biggest bank, signalling just how low interest rates have gone in the last year.
The race to the bottom was sparked by Westpac, who dropped their rate to 1.79% last week. They were followed by NAB, who also broke 2% by reducing their two-year fixed home loan rate at 1.89%.
Banks have started to raise their longer-term rates with CBA raising their four-year interest rate, pushing it up 20 points to 2.34%. BOQ have increased their four & five-year fixed rates by 30 points to 2.29% & 2.39% respectively.
This is thought to be a reaction to the ongoing insistence from the Reserve Bank of Australia that they will not raise the cash rate, which at 0.01% is at a record low, until 2024 at the earliest. But most experts seem to think that they will be forced to bring their plans forward.
Investors however are being encouraged to re-enter the property marketplace. Especially in WA with pressure on increasing rentals and almost zero vacancy.
Investor rates at BOQ dropping in range between 23 basis points to a whopping 64 points for interest only lending. Bringing interest only lending rates closer to owner occupied rates in the low 3% range. Lower than we have seen in years since the “speed bumps” on banks’ lending were imposed by APRA.
“Low interest rates have also been attributed as the main reason for recent house price increases,” said Adrian Kelly, CEO of the Real Estate Institute of Australia (REIA). “It’s not only buyers that have increased purchasing power but all mortgage holders who have seen interest rates go down are seeing their equity increase as more of their repayment goes to eroding the mortgage principal rather than interest.”
We recommend that anyone either in the property market or thinking about it get into to speak with their bank or mortgage broker to ensure you are not paying unnecessary extra costs on your mortgage.
Warm regards,