Westpac has become the first of the big banks to make a move with their two-year fixed interest rate, raising theirs from 1.79% to 1.89%. Their three-year rate has also gone up by ten points, from 1.88% to 1.98%.
Westpac’s main two subsidiaries, St George Bank and Bank of Melbourne, will also move their rates in line with that of their parent company.
CBA were the first to move on four-year and three-year rates, but Westpac have jumped the gun in advance of expected rises in the price of money that will follow the beginning of the new term funding period at the end of June.
Even with this new rate rise, Westpac are still below the symbolic 2% threshold of ultra-low rates. ANZ are still the only one of the Big Four banks above that marker, though they are currently offering 2.04% across one, two and three-year fixed home loans for owner-occupiers.
The interest price war has been ongoing since at least March, if not earlier, as all the major lenders sought to take advantage of the current low price of money, as seen with the current 0.1% cash rate, to offer increasingly low rates for mortgages.
That has in turn sparked the ongoing property boom, as a diverse range of circumstances come together to see exploding house prices in both metropolitan areas and Regional Australia.
The low interest rates, the lack of spending in 2020 caused by COVID-19 and the rebounding confidence in the economy are just some of the contributary factors that have led to the property boom being called ‘a perfect storm’.
The Reserve Bank of Australia insists that it will not budge on their historically low cash rate until wage growth is sufficiently high and unemployment is sufficiently low, which they say will not be before 2024.