Sub-6% home loans all but disappear as funding costs soar
Forty lenders, including all four major banks and their subsidiary brands, have passed on the Reserve Bank’s September cash rate rise, leaving plenty of borrowers now paying more than 7% on their home loans, according to Canstar’s latest weekly rate wrap-up.
Variable pricing moves higher
The lenders lifted 375 owner-occupier and investor variable rates by an average of 0.25 percentage points. Only three lenders moved the other way, trimming six variable rates by an average of 0.10 percentage points.
Canstar’s database currently puts the average variable rate for owner-occupiers paying principal and interest at 6.75%. Pacific Mortgage Group offers the lowest variable rate at any LVR, at 5.69%, and it is the only rate on the database below 5.75%.
That floor is expected to rise. Canstar data insights director Sally Tindall (pictured) said that once every lender has passed on the increase, the lowest variable rate is set to sit at 5.94%.”
Fixed rates send a warning
Fixed pricing has also climbed, with 21 lenders raising 510 owner-occupier and investor fixed rates by an average of 0.21 percentage points over the past week.
“This week we officially said goodbye to fixed rates starting with a ‘5’ as the last of the lenders hike these rates above the 6% mark,” Tindall said.
She described the volume of fixed-rate increases as “a troubling sign considering banks tend to move fixed rates ahead of an RBA hike, not following.”
The repricing has tilted the market firmly towards variable loans. More than 90% of lenders now offer their cheapest rate on a variable product, with the gap between each lender’s lowest fixed and variable rates averaging 0.34 percentage points.
Not every borrower can switch
Borrowers with straightforward loans may be able to secure a better deal by refinancing or negotiating with their lender. However, Tindall cautioned that those with more complex arrangements, or whose financial position rules out a switch, could remain stuck for now.
“It’s difficult medicine to swallow for borrowers on behalf of a high inflation nation,” she said.
The pressure on mortgage holders contrasts with conditions for depositors, some of whom can now access savings rates of 6.00% or more, provided they meet the attached conditions.
