The era of ultra-low interest rates in Australia might be coming to an end as the last bank with a sub-2% long-term rate has hiked theirs above that symbolic mark.
BankVic was the last of the major lenders to make the move, jumping theirs from 1.95% to 2.29%.
Previously, 32 lenders had been beneath 2%, including all the Big Four, but all have raised their rates in recent weeks as Australia prepares to enter a new bond period beginning at the start of July.
CBA were the major mover in the market, hiking their four-year rate at the same time that they lowered their two-year rate. They then upped their three-year and four-year rates at the end of May, signalling to the market that Australia’s biggest bank were anticipating a higher price of doing business in the middle-to-long term.
The cash rate, which typically dictates the interest rate environment, was maintained at historically low levels again this month, with the Reserve Bank of Australia insisting that it will not move until 2024 at the earliest.
However, the cash rate is not the only factor influencing Australian interest rates: the bond market, which regulates the cost of money, is set to enter a new phase in July 2021, with banks now facing the potential that costs will go up before the cash rate does.
“The lenders are expecting the RBA to shift gears in July and move forward with tapering off the provisions put in place for the pandemic fallout,” said Jay Ahluwalia, mortgage specialist at YourMortgageBroker. “All four-year rates on our panel now sit above the 2% mark.”
“It's times like these where our clients need our expertise even more to calculate cost benefits of different fixed-terms and how these fit in with their goals. There are still three-year fixed term offers that can represent great value, but this situation could change come July when the RBA finally does move into the next phase - whatever that may look like.”