NAB, the final hold out of the Big Four on long-term fixed rates, has finally made a call on long-term fixed rates.
First CBA, then Westpac, then ANZ had made the same decision in the last two weeks, with all fixed rates over two years going up and one-year fixed going down.
NAB added 10 points across 2-, 3- and 4-year fixed rates, upping their two-year above the symbolic 2% barrier. They also added 20 basis points to their 5-year fixed, taking it close to 3%.
Simultaneously, the Big Four bank has lowered its flagship 2-year variable rate, slashing 40 points off to take it as low as 2.29%.
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They are following the lead that has been set in the industry in the last two weeks, with a slew of lenders pricing in a rise in the cost of money that is likely to kick in at some point in early 2022, as well as a potential rise in the cash rate in 2024.
The higher rises in four and five-year interest rates from NAB and other lenders suggests that they think that the scheduled cash rate rise that the RBA has promised in 2024 will not be the only time that the basic cost of interest goes up.
Inflation, which has spiked in recent weeks, has been a large driving factor of this decision making process. When inflation goes up, interest rates can be used to balance it out, with many in the industry predicting that this will happen.
“If you look at underlying inflationary pressure, there’s a really good sign that something is happening,” said John Kolenda, managing director at aggregator Finsure. “If it’s starting to get out of hand, the RBA might be forced to review.”
“If you’re anticipating a strong rebound like we’re seeing in European, US and New Zealand markets, clearly the Treasury is going to be put under pressure to increase rates.”
“The bond market tends to price in anticipation of an increase in rates with escalating inflation, which appears to be happening globally.”