Westpac, UBank raise fixed home loan rates: Is this the end of ultra-low rates?

Deputy Editor · 30 April 2021
Major lender Westpac hiked the rates on some of its longer-term fixed home loans today, while NAB subsidiary UBank also lifted rates, potentially adding fuel to expectations that interest rates for Aussie borrowers are on the way up.
Westpac HL discount for new customers_Article
Source: Vitalii Tairov, Canstar.

The Westpac Group (Westpac, St.George, Bank of Melbourne, BankSA) announced a rate increase on some of its standard and package 4- and 5-year fixed home loan rates by 30 basis points for owner-occupiers making principal and interest repayments.

The new rates on Westpac’s fixed rate package home loans affected by the increases are as follows.

For borrowers with a loan-to-value ratio (LVR) above 70%, up to 95%:

Premier Advantage Fixed Options Fixed for 4 years: 2.29% (comparison rate 3.38%)
Premier Advantage Fixed Options Fixed for 5 years: 2.59% (comparison rate 3.43%)

For higher-deposit borrowers with an LVR of up to 70%, the new rates are:

Premier Advantage Fixed Options Fixed for 4 years: 2.19% (comparison rate 3.28%)
Premier Advantage Fixed Options Fixed for 5 years: 2.49% (comparison rate 3.33%)

Following the rate increases, the major bank no longer has the market-leading 4-year fixed rate on Canstar’s database for owner-occupiers making principal and interest repayments. For now, that honour goes to BankVic with its rate of 1.95% (comparison rate 3.50%) on its Premium Home Fixed product. The lowest 5-year fixed rate on Canstar’s database is ING’s Orange Advantage Residential Fixed loan at 2.19% (comparison rate 3.37%). These rates are based on a $500,000 loan with an LVR of 80%.

The other banks in the Westpac Group are also affected by the changes to their Premier Advantage Fixed Options Fixed 4- and 5-year products, as well as their non-package Residential Fixed home loans for those terms. You can see these lenders’ current rates and how they compare to other providers using Canstar’s comparison tables.

Meanwhile, UBank – a digital banking subsidiary of Westpac rival NAB – is no longer offering the lowest 3-year fixed rate on Canstar’s database for owner-occupiers paying principal and interest, after it raised the rate on its UHomeLoan 3-year fixed by 10 basis points to 1.85% (comparison rate 2.24%) on Friday, 30 April. The new lowest rate on the database in that category is Credit Union SA’s Fixed Home Loan Package P&I product at 1.79% (3.33% comparison rate).

Is this the beginning of the end for ultra-low interest rates in Australia?

In April 2021 so far, 12 lenders on Canstar’s database have increased their 4- and 5-year fixed rate loans, while last month Australia’s largest lender, Commonwealth Bank, increased its 4-year fixed rate for principal and interest borrowers by 20 basis points.

Commenting on the trend of rising longer-term fixed rate loans, Canstar’s Steve Mickenbecker said this could be a sign of further increases to come across other loan types, but that borrowers still had no shortage of low rates to choose from.

“Australia’s economic recovery is fuelling expectations that interest rates will rise,” he said.

“Fixed rates typically move before variable rates, and the longer-term fixed rates lead the way for rising rates on other home loans.”

Mr Mickenbecker said shorter-term fixed rates were currently offering borrowers some of the cheapest rates.

“Australians have typically been reserved about fixing their home loan rate for longer than three years, so it is not surprising to see more competitive rates for the shorter terms to meet customer demand. One, two and three-year terms are now especially favoured by the banks.

“Regardless of whether mortgage holders are maintaining a variable rate or looking to lock in, as long as they’re doing their homework and getting amongst the competitive rates on offer today they are setting themselves up for home loan success.

“There are still plenty of competitive rates across the board, with Canstar listing 180 fixed and variable rates below 2%,” Mr Mickenbecker added.

Last week, member-owned bank bcu became the lender on Canstar’s database with the lowest home loan interest rate – 1.67% (comparison rate 3.84%) on its one-year fixed rate loan for owner-occupiers making principal and interest repayments. This week’s news of a lower-than-expected rise in consumer prices over the first three months of 2021 has dampened any expectation that the Reserve Bank of Australia will shift from its position of keeping the cash rate at its current record-low level until 2024, ahead of its May board meeting on Tuesday.

Thanks for visiting Canstar, Australia’s biggest financial comparison site*

Sean has more than a decade of experience in journalism and communications roles in Australia, the UK and Ireland. His work covers a range of topics including finance, banking, property, investing, consumer and legal affairs, and more.

Share this article