The lowest fixed home loan rate on record was hiked yesterday, ending an era for ultra-low fixed rates.
Greater Bank lifted its 1-year rate from 1.59 per cent to 1.89 per cent for owner-occupiers paying principal and interest.
The new lowest fixed rate in the market is now 1.79 per cent, which is available from UBank, Qudos Bank and RACQ for 1 year.
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RateCity.com.au found Greater Bank was not the only lender hiking rates, with its database showing more than half of all lenders - including the Big Four - had hiked at least one fixed rate in the past two months.
As a result, there are now just 41 fixed rates under 2 per cent, with that number expected to fall to zero, or close to zero, within the next six months.
“Today’s hike from Greater Bank marks the end of an era for record-low fixed rates,” Sally Tindall, research director at RateCity.com.au, said.
“We are unlikely to see another fixed rate of 1.59 per cent for years, if ever.
“At the beginning of 2021, there were 117 fixed rates under 2 per cent. This number peaked in April at around 180 but has plummeted in the last couple of months.”
Tindall said that while there were still 41 fixed rates under 2 per cent, the list was shrinking quickly.
“We expect the majority of these to be gone within the next six months,” she said.
“Banks are still trimming variable rates, but the cuts have largely been to their basic loans and almost always reserved for new customers.
“While we expect more cuts to variable rates in the next few months, we could see some lenders hike later this year ahead of the RBA, if the cost of funding continues to escalate.”
Eyes on the RBA
The Reserve Bank of Australia has remained steadfast it will not raise interest rates until 2023, however many banks and economists are predicting a rise much sooner.
“I think they'll be forced to move earlier than they have suggested,” AMP Capital chief economist Shane Oliver told Yahoo Finance in December last year.
“We expect rate hikes coming in November of next year. So, they’re a way off but the bank will ultimately be driven by data and forecasts.”
And while inflation has been the cause of the US Federal Reserve to signal a number of rate hikes this year, RBA governor Philip Lowe doesn’t believe Australia is in the same boat.
In his December rates decision, Lowe noted that inflation in Australia was rising but he didn’t believe the change was significant enough.