Major raises fixed rate: Is this the beginning of the end for record lows?

by Mackenzie McCarty09 Jul 2013

ANZ has increased its three-year fixed rate mortgage by 0.20% to 5.34%, making it the first major bank to buck the record-low interest rate trend and sparking fears that the rate cut gravy train could be charging to a halt.

“The decision was based on a number of factors, including the recent funding cost pressures specific to our fixed rate products, which includes increased pricing in bond markets following recent volatility,” an ANZ spokesperson tells Australian Broker.

Yesterday, we reported on Westpac CEO, Gail Kelly’s comments that rate cuts by major lenders outside of the RBA cycle are unlikely in the near future. Like ANZ,  Kelly cited increasing funding costs, as well as ‘very low’ credit demand, as her reasoning behind the statement.

“Funding costs had been on a lovely decline earlier in the year and you could see that actually coming through; the funding costs were lower than they’d been a year ago and two years ago and three years ago. Right at the moment, they’ve picked up again. In fact, people are not out there raising money through off-shore wholesale funding opportunities.”

COMMENTS

  • by Casey 9/07/2013 9:07:22 AM

    Hmmm... Increased funding costs and lower credit demand. It's been some time since I did an economics unit so I might be wrong. But these would appear to be two opposing forces, that in an open market would generally cause prices to recede due to lack of demand. I may have over simplified this, but curious to know the factors increasing costs?

  • by Broker 9/07/2013 9:27:04 AM

    Low demand, increased costs of funds ,yet continued record profit results , what a truly unique business model our banks enjoy....

  • by Broker Tony 9/07/2013 9:33:28 AM

    ANZ have form when it comes to playing with fixed rates. They did exactly the same thing a few months back raising their 3 year fixed rates I think by about .4% when all the others were heading down. A month or so later they dropped them back again. If I was cynical I would wonder how many 3 year fixed rate loans were in the system with no rate lock? It may also be a message to brokers to take rate lock and pay the fees regardless of the outlook for rates generally!