Westpac has announced interest rate increases for its two- and three-year fixed rates, with subsidiaries St George, Bank of Melbourne and BankSA also set to increase rates.
The bank will increase rates by 0.10 per cent, taking Westpac’s lowest two-year rate to 1.89 per cent from 1.79 per cent.
Its three-year rate will increase to 1.98 per cent to 1.88 per cent.
Westpac’s move comes after CommBank also lifted its three-year rate in May.
“Three-year fixed rates are on the rise as the banks start to factor in an expected increase to the cost of funding,” RateCity.com.au research director Sally Tindall said.
“The RBA’s term funding facility, which has been offering the banks money at just 0.10 per cent fixed for three years, is wrapping up in three weeks. We expect more banks to hike as a result.”
With CommBank and Westpac now both having hikes their three-year rates, Tindall said it’s “only a matter of time” before ANZ and NAB do the same.
Nine lenders including ING and AMP have also already increased their three-year rates.
“The two-year rate hikes have come earlier than expected, but they were coming off a near-record low. [Westpac] would have been squeezing its profit margin to offer those rates,” Tindall added.
“Even with a 0.10 per cent hike, Westpac and St George are still offering very competitive rates, particularly for people with decent deposits.”
The lowest three-year fixed now on RateCity’s database is Credit Union SA which holds a 1.79 per cent interest rate. For two-year fixed rates, BCU has the lowest rate at 1.78 per cent.