June, which is why the big four banks are attempting to win market share with their variable mortgage deals.
Less than two weeks ago, Westpac slashed its lowest variable rate to 2.09 per cent, followed by Commonwealth Bank, which cut its lowest variable rate per cent to 2.19 per cent. The ultra-low rates can be enjoyed by borrowers who are able to put down a deposit of 30 per cent or more, as the lenders compete for lower-risk borrowers. It is not only Westpac and Commonwealth Bank who have lowered their variable mortgage rates according to RateCity, which tracks financing and deposit rates. The firm revealed that variable rates below 2 per cent is now being offered by about 35 lenders in the country.
Meanwhile fixed-rate mortgage offerings for Australians have continued to soar, with 0.3 per cent hike in the three-year fixed mortgage rate offered by Commonwealth Bank. Accordingly, the rate now stands at .79 per cent, more than 1.5 per cent higher than its variable rate offering. Higher rates on fixed-rate mortgage offerings are also not limited to Commonwealth Bank, with rates on these deals varying between 3.59 per cent and 3.79 per cent. This is a significant increase from September last year, when rates on three-year fixed rate home loans offered by the big four banks stood between 1.98 per cent and 2.19 per cent.
This sharp rise in fixed rates is a result of an aggressive rate-rising cycle expected from central banks to counter higher inflation. And although concerns have arisen that households may struggle to cope with the sharp increase in interest rates implied by the market, lenders and policymakers are of the view that there are sufficient buffers in place to tackle such challenges.
Maile Carnegie, ANZ Banking Group’s head of retail banking, said the firm’s mortgage book is “in really good shape”, despite a decline in consumer confidence. “If you look at the balance sheet of our customers, you know, about 70 per cent of our customers are ahead on their mortgage payments,” she told The Australian Financial Review. Reserve Bank governor Phil Lowe pointed out that while there are risks, the median borrower was two years ahead on their mortgage payments. “They cannot make payments for two years, and still be on schedule. It’s quite remarkable,” he said.
