First Fixed Rate Move of 2022
Westpac has kicked off the fixed rate action for 2022, adding 20 points to their longest-term rate, the five-year, and 15 points to mid-term rates.
The 5-year fixed now stands at 3.59%, with 4-year at 3.34% and 3-year at 3.04%.
The gap between 2-year at 2.59% and 3-year at 3.04% remains wide, suggesting that Westpac is anticipating the expected rise in the Reserve Bank of Australia (RBA) cash rate to be at some point next year.
All of the Big Four engaged in a wave of rate rises late last year, with more than 20 separate raises, including several banks upping their costs four times within two months in an attempt to factor in expected increases in the cost of funds.
According to Rate City, 17 lenders have already hiked their 3-year fixed rates this year, with none lowering their prices.
The cost of fixed-term funding is rising with inflation in the US, hitting its fastest pace in nearly four decades. Some are predicting a further five hikes from the RBA from the end of 2022 through to 2024. Other banks are expected to follow within days on the back of sharp increases to the cost of wholesale funding.
Mortgage holders who were fortunate enough to lock in a record-low fixed rate over the last couple of years are immune to these hikes, but only for the duration of their fixed rate term.
Anyone who fixed at the start of the pandemic for two years should start thinking about what their next step might be. When they come off their fixed rate, they’ll be looking at a very different market.
There are now just 40 fixed rates under 2% and the list is shrinking by the week. Some mortgage holders might decide to switch back to a variable rate as there are more sub-2% options available.
Fixed rates might be on the rise, but competition in the variable rate market is still alive and kicking with ANZ making the first move in 2022 and reducing their variable rate. The new rate will see customers with over 30% deposit, or 70% LVR, charged 2.19% and those with an LVR of 80% charged 2.29%, taking ANZ to joint cheapest in the Big Four along with Westpac.
But let’s keep things in perspective – the average rate historically in Australia is around 7%. So we are a long way from getting back to those levels.
- What does that mean for borrowers? You should always fix in line with your life plans as best you can.
- Look to lift your repayments and get ahead now whilst rates are low. You won’t necessary feel the extra $10-$20 per week or fortnight but it builds up over time.
- If you lift your payments now – you not only save interest and get ahead on your mortgage while you can – you also build a tolerance of the higher payment. So, when rates officially do rise, you already have a tolerance of that higher payment.
- Don’t take on too much debt – especially personal debt. Try and keep things comfortable and don’t overextend.
Speak with your broker – hopefully me – and always look to see if you are getting the best rates that you can for your circumstances.
Contact Donna-lee for a quick overview/health check on your existing rates.
Warm regards,