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Rate hike wars: Westpac increases fixed rates

·2-min read
The Westpac logo on the exterior of a branch and an aerial view of an Australian suburb.
Westpac has hiked its three, four and five year fixed rates. (Source: Getty)

Westpac has made sweeping changes to its popular fixed home loan rates today in a decision that will cost customers more.

The major bank hikes its three, four and five-year fixed rates by up to 0.21 per cent, following on from St George and Bank of Melbourne.

“This is the second time Australia’s second largest bank has hiked fixed rates in just over two weeks,” research director Sally Tindall said.

“Westpac has hiked its longer-term fixed rates yet again on the back of an expected increase to the cost of funding. The RBA’s shift in monetary policy this week is likely to have spurred this decision,” she said.

Westpac fixed rate changes chart
Westpac fixed rate changes (Source: RateCity)

Tindall said it was expected that the other major banks would follow suit in the weeks and months to come. She also warned some may hike multiple times.

“For anyone thinking about fixing their rate, it’s not too late to get a good deal,” she said.

“However, in this environment where banks are falling over each other to announce their fixed-rate hikes, people might want to consider paying a rate-lock fee.”

Rate-lock fees are fees you pay to the bank to lock in your rate while your home loan application is being processed.

This means that if fixed rates rise before your home loan has settled, you still get the lower rate.

“Often, rate-lock fees can be a complete waste of money, particularly when fixed rates are falling, but in an environment where rates are on the rise, they’re definitely worth considering,” Tindall said.

“Home loans can take up to six weeks to settle – a lot can change in that time.

“Ultimately it’s a gamble between whether your bank is going to hike in the time it takes to settle your loan or not, however, losing to a rate hike is far more costly than losing a couple of hundred dollars on a rate-lock fee.”

How new Westpac customers may have been affected analysis found that a customer currently applying for a $500,000, 3-year fixed rate with Westpac, could potentially pay an extra $2,577 over the fixed-rate term if they didn’t lock in their rate.

In this scenario, the borrower would have been better off paying Westpac’s rate-lock fee of $500. However, this only applies if rates rise during the application process.

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