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RBA keeps cash rate on hold – so why are home loan rates still changing?

RBA keeps cash rate on hold – so why are home loan rates still changing?

The RBA has kept the cash rate on hold his month, but that hasn’t stopped banks from moving home loan rates.

While lenders have made a flurry of cuts to 2- and 3-year fixed rates in the last month, there has been an increase in the number of lenders hiking 4-year fixed rates.

Analysis of the RateCity database shows 11 lenders have raised 4-year fixed rates, including CBA, Bendigo Bank and Aussie Home Loans, while only two have cut them.

RateCity database: Lenders that have moved at least one fixed rate in the last month

Lenders that have cutLenders that have hikedCurrent lowest rate
1 year fixed1361.69%
2 year fixed2771.74%
3 year fixed1951.75%
4 year fixed2111.89%
5 year fixed872.14%
Variable 1641.77%

 Source: RateCity. Note: A number of lenders have changed multiple home loan rates.

Why are 2-year fixed rates still dropping and 4-year rates rising?

RateCity research director, Sally Tindall, said the RBA was helping facilitate the ultra-low fixed rates, in part, via its term funding facility, which allows banks to borrow money at a three-year fixed rate of 0.10 per cent.

“Over the last month, the majority of one- to three-year fixed rate changes have been cuts, not hikes, as lenders make the most of the low-cost funding available,” she said.

“However, in the last month the majority of four-year fixed rates changes were in the opposite direction as some banks start to factor in a likely rise to the cash rate in 2024 and the end of the RBA’s term funding facility on 30 June this year.

“The big question is whether Westpac will hike its four-year rate. Australia’s second largest bank currently has the lowest four-year fixed rate in the market. Hiking this rate could lose the bank its competitive edge in this category.

“Watching these four-year rates come off the table has some people panicked they will miss the bottom. Just because these rates could be soon rise, doesn’t mean you should rush out and fix for the next four years.

“If you are looking to refinance, work out what type of mortgage suits your finances. Then shop around for a competitive rate, not the other way around,” she said.

Lowest rates on RateCity database

 Lowest ratesLenderRate
1 year fixedGreater Bank, RACQ (postcodes restrictions apply)

1.69%

2 year fixedHomestar Finance

1.74% 

3 year fixedUBank

1.75% 

4 year fixedWestpac, St George, Bank of Melbourne

1.89% 

5 year fixedBank Australia

2.14% 

VariableReduce Home Loans

1.77% 

Source: RateCity. Rates are for owner occupiers paying principal and interest. Some LVR requirements apply. Greater Bank (NSW, QLD, ACT only), RACQ (QLD only).

Big four banks – lowest owner-occupier rates 

CBAWestpacNAB ANZ
1 year fixed

2.09%

1.99%

2.09% 

2.04%

2 year fixed

1.94%

1.79%

1.89%

2.04%

3 year fixed

2.14%

1.88%

1.98%

2.04%

4 year fixed

2.19%

1.89%

1.98%

2.24%

5 year fixed

2.99%

2.19%

2.24%

2.24%

Variable

2.69%

2.19% for 2 yrs

then 2.69%

2.69%

2.72%

Source: RateCity.com.au. Note: Westpac's rates are for a loan to value ratio of 70%.

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This article was reviewed by Research Director Sally Tindall before it was published as part of RateCity's Fact Check process.

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