ANZ increases two-year home loan interest rate

ANZ has moved to increase the interest rate on some fixed-interest mortgages, prompting some speculation that rates may have hit the bottom.

ANZ is increasing rates on two-year fixed mortgages. Picture: AFP

ANZ has hiked its interest rate on two-year fixed owner-occupier loans by 10 basis points to 2.29 per cent, marking the first major bank to increased fixed interest rates since the Reserve Bank’s emergency rate cuts on March 19

The move has prompted suggestions that longer term bank funding costs – a key driver fixed rate pricing – may be at or near the bottom of the cycle.

Since May 1, eight banks have increased rates on owner-occupied variable home loan products, while 20 lenders – including non-banks – increased two-year fixed rates, according to figures by mortgage research house RateCity

“There’s no question we’re close to the bottom of the fixed rate market but some lenders could still potentially shave their rates further in a bid to get new customers in the door,” RateCity research director Sally Tindall told The Weekend Australian.

ANZ’s increase brings it into line with two-year rates offered by NAB and Commonwealth Bank. While ANZ has made the first increase on fixed rates on its home loan portfolio, NAB has slashed its two-year fixed rate for interest only loan by 60 basis points to 2.79 per cent.

Westpac is offering the lowest two-year fixed principal and interest rate of the big four, at 2.19 per cent. The changes do not apply to variable mortgage rates which make up the bulk of ANZ’s home loan book.

The changes to fixed rates coincide with a number of banks increasing cash back offers in an attempt to lure new home loan customers.

Figures released by Rate City indicated ANZ was offering a cashback of up to $4000 for refinancing on brokers-only loans, while CBA and Westpac were advertising cashbacks of $2000 for borrowers. ANZ said in an email sent on Friday its cashback offer would move to $3000 on June 1.

Suncorp Bank is offering $3000 to refinancers, as well as an additional $1000 cash back to essential workers who refinance their loan.

Suncorp’s offer is available to customers who apply before July 10 and settle by November 10.

Ms Tindall, said the cashbacks were being used in new ways by the banks to attract new customers to boost interest income.

“Cashback specials are nothing new. They’ve been used for years as a clever marketing tool to grab people’s attention,” Ms Tindall said. “What’s changed is the banks are starting to offer cashback on loans that also have competitive rates.”

Ms Tindall said one-off cashback perks were sometimes a trade-off on obtaining a competitive mortgage rate.

“Someone who refinances every couple of years to a competitively priced loan could potentially come out on top by taking up a cashback special,” Ms Tindall said.

“However, over the long term, it’s a completely different story. A low rate is almost certainly going to trump a one-off perk over 10 or 20 years, often by tens of thousands of dollars.”

HSBC chief economist Paul Bloxham said on Thursday that Australian house prices were expected to tumble by 12 per cent due to the economic impacts of COVID-19.