Westpac lifts four and five-year fixed rates as property prices soar

As property prices soar, Westpac has likely signalled the end of ultra-low rate short-term financing.

Australians have sought to lock in ultra-low mortgage rates as the Reserve Bank of Australia has repeatedly said it has no plans to raise the official cash rate until 2024. Picture: NCA NewsWire / Gaye Gerard

Westpac has raised its four and five-year fixed rates as property prices soar, which could spell the end of ultra-low financing.

The banking giant’s 1.89 per cent four-year fixed rate was the lowest in the market prior to Wednesday’s hike, leaving National Australia Bank as the only bank of the big four to still have a four-year fixed rate offer below 2 per cent.

The new rate on Westpac’s four-year fixed loan will be 2.19 per cent, up 30 basis points.

Its five-year fixed rate increases by a similar amount from 2.19 per cent to 2.49 per cent.

A Westpac spokeswoman said the bank is operating in a “historically low interest rate environment and needs to continue to manage pricing changes in a sustainable way”.

“In making this change, we considered the different needs of our stakeholders and the factors that influence the cost of funding,” she said.

Australians have sought to lock in the ultra-low rates as the Reserve Bank of Australia has repeatedly said it has no plans to raise the official cash rate until 2024.

RateCity.com.au research director Sally Tindall says Westpac’s move “could be the end of an era for ultra-low four-year fixed rates”.

“Westpac held out as long as it could, but with a cash rate hike on the cards in 2024 and the RBA’s term funding facility wrapping up in a couple of months, the bank’s record-low four-year fixed rate was unsustainable,” Ms Tindall said.

“Westpac’s 1.89 per cent four-year fixed rate has now been relegated to the history books. It’s hard to see a major bank dropping its four-year fixed rate this low for a very long time, if ever.”

The move comes just weeks after The Australian reported that several lenders including the Commonwealth Bank and Bendigo Bank were quietly ditching their ultra-low four-year fixed rate offers.

Over the past two months, 24 lenders have raised their four-year fixed rate.

BankVic’s 1.95 per cent four-year fixed rate is now the lowest in the market, with just six lenders still offering a four-year fixed rate under 2 per cent.

RateCity research director Sally Tindall.

As the Australian economy rebounds strongly, cuts to three-year fixed rates could also be on the horizon.

“While the majority of banks’ three-year fixed rate changes are still cuts, rather than hikes, the tide could turn later this year as the economy continues to recover,” Ms Tindall said.

“The cost of funding is likely to increase in coming years, so it’s no surprise lenders are starting to factor this in.”