Australian Banks Begin Raising Fixed Mortgage Rates.

Post by Sharat on April 21, 2009 · Under Australian Economy, banking, home loans, interest rates, mortgages · Comment 

Three of the Australian big four banks have increased their fixed mortgage interest rates, following National Australia Bank’s (NAB) lead last week in raising their fixed rates citing higher funding costs as the reason.

Yesterday first Commonwealth followed NAB’s lead and raised its fixed mortgage interest rate followed by Westpac announcing its decision to do the same. ANZ interest rates remain unchanged as of now.

CBA’s four-year fixed rate home loans rose 20 basis points, or 0.2 percentage points, to 6.59%, effective Tuesday, while its five-year fixed rate home loan was increased by 45 basis points to 6.84%.

Westpac raised its one-year fixed rate mortgages also by 20 basis points to 5.39% and its two-year fixed rate mortgage was raised by 30 basis points to 5.49%. Westpac also increased its three-year fixed mortgage 40 basis points to 5.79%, while the five-year mortgage has nudged up 10 basis points to 6.39%,

NAB. the first bank to raise fixed interest rates increased its two and three year fixed rate mortgages by 20 basis points on April 14th. NAB’s standard fixed rates for two-year home loans increased to 5.29 per cent, while the rate for three-year home loans lifted to 5.49 per cent.

All three banks cited higher funding costs, despite the Reserve Bank of Australia having cut official lending rates to their lowest in 45 years. Fixed rate mortgage interest rates are not so dependent on short term official interest rates.

Banks and lenders tend to fund fixed rate mortgages with term funding on money markets or through fixed deposits of similar duration, locking in their spread. Therefore fixed interest rates do not move in the same fashion that variable mortgage rates do and can, depending on the funding scenario actually move in the opposite direction depending on the cost of term and money market funding.

Commonwealth Bank said the rates on fixed interest loans ”reflect the recent increases in the wholesale market swap rates that the bank funds fixed term home loans from.”

ANZ is yet to alter its fixed-rates rates since January, leaving them at 5.99% for a one-year and two-year fixed rate mortgage and 6.19% for a three-year rate, a spokeswoman for the bank said.

The Australian central bank has reduced official interest rates by 425 basis points since September, as it battles to spur growth in the economy. The interest rate currently stands at a 49-year low of 3%, following this month’s latest 25 basis point cut.

Banks came in for criticism when they passed on only part of the latest, with CBA and Westpac trimming variable lending rates by 10 basis points.


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