ANZ have launched the next move in Australia’s interest rate price war, hiking their rates across all long term home loans, but dipping their two-year rate beneath the symbolic 2% barrier for the first time.
The hikes are substantial: 45 points have been added to the 5-year rate, taking it from 2.24% to 2.69%. The previous rate was the most competitive of all the big banks over the five-year term, but that is no longer available.
The four-year rate is now 2.49%, a jump of 25 points, making it by far the highest of any Big Four lender.
At the same time, ANZ have slashed 10 points off their two-year rate, taking it to 1.94%. They had long been the last holdout above the 2% barrier, but seem to have accepted that their rates were becoming less attractive when all other major competitors were below that symbolic threshold.
The move comes as we prepare to enter a new term funding period, which will see the banks potentially facing a more expensive cost of money, which is why they are hedging their bets on long-term interest rates.
“Inflation levels are unlikely to fall within the RBA’s ideal range of 2-3% until 2024,” said Ankeet Hindocha, Home Loan Associate at YourMortgage. “Which means they are unlikely to significantly change cash rates in the short term. This has caused mainstream lenders to maintain their short-term rates at historic lows and allowed ANZ to finally go under 2%.”
“Most mainstream lenders were quick enough to announce low long-term fixed rates below 2% at the peak of the pandemic. However, no mainstream lender are offering this low rate anymore, which seems to be in line with the conclusion of the RBA term funding facility in three weeks, a facility which provided almost $200 billion of funding to banks at a historic rate of 0.1 percent. That goes in July.”
“The banks are also concerned about a breakout in inflation, since the governments are pumping in cash and the global economy is recovering from this pandemic. This is another reason the banks are hiking their long-term rates.”
“These hiked rates before the term funding period change may see repayments for households on variable rates to lift sooner than expected and those on fixed rate could see an even bigger lift at the end of the term.”