How Much Have Fixed Rates Risen Ahead of the RBA Decision?
Ten lenders raised 266 owner-occupier and investor fixed rates in the week to 22 September, with three of the major banks moving within 24 hours of each other and some fixed rates at one major bank pushing above 7% Australian Broker. Sixteen lenders had raised at least one fixed rate in September by Monday.
The largest single move came from a major bank that lifted its two-year fixed rate from 6.34% to 6.82%, with its other fixed terms rising by between 0.15 and 0.30 percentage points Australian Broker. The lowest fixed rate at the big four is now 6.49%, while seven lenders across the market still offer at least one owner-occupier fixed rate starting with a 5.
Lenders price fixed rates on expected funding costs over the fixed term, so these moves reflect the market’s view that at least one more cash rate rise is coming. Westpac and CBA brought their forecasts forward to the 29 September meeting, joining NAB, while ANZ expects rises in both September and November.
How much would a 0.25 percentage point rise add to repayments?
On a $600,000 principal and interest loan with 25 years remaining at around 6.2%, a 0.25 percentage point rise adds roughly $93 a month. The change applies to variable rate loans once the lender passes it on and gives notice, while fixed rate loans are unaffected until the fixed term ends.
What Did the August Jobs Figures Show?
The unemployment rate rose to 4.6% in August from 4.5% in July, while the participation rate lifted to 67.1% Australian Broker. Victoria recorded the highest unemployment rate at 5.2%, and New South Wales the lowest at 4.3%. CBA economist Ashwin Clarke said the data suggests “the labour market continues to gradually loosen,” with unemployment tracking slightly higher than both CBA and the RBA expected.
A softer labour market would normally argue for patience, but the RBA’s focus remains on inflation. The July figures had the trimmed mean steady at 3.6%, and the August inflation data will not be released until the day after the Board meets. More than 90% of futures pricing pointed to a rise by midweek.
Is Mortgage Demand Close to the Bottom?
Equifax data showed mortgage demand fell 14.1% year on year in August, the fifth monthly decline in a row but a smaller fall than July’s 16.4% Australian Broker. First home buyer applications fell 20%, and demand among 18 to 25-year-olds dropped 21.7%. Equifax’s Moses Samaha said “we may well be at or near rock bottom in terms of this contraction cycle,” while warning another rate rise could push that floor lower.
Refinancing activity is shifting too. Total refinance demand fell 12%, driven by a 22.8% drop in borrowers refinancing with their existing lender, while switching to a different lender fell only 1.1%. Borrowers looking to refinance are increasingly comparing the whole market.
Buyers have a clear idea of what would bring them back. Cotality’s latest consumer sentiment survey found Australian respondents named a median mortgage rate of 4.9% as the level that would draw them into the market, and 75% of buyers have cut or plan to cut lifestyle spending to afford a home Australian Broker. Cotality chief economist Selma Hepp noted that waiting for a target rate carries its own cost, saying: “It’s expensive to buy a home. But so is renting.”
How Many New Borrowers Have Small Deposits?
APRA’s June quarter property exposure statistics show 29.7% of new home loans were written at a loan-to-value ratio of 80% or higher, while non-performing housing loans sat at 1.01% of all home lending APRA. The high-LVR share reflects strong use of the uncapped Home Guarantee Scheme, which allows eligible buyers to purchase with a 5% deposit without lenders mortgage insurance.
Borrowers who bought with a small deposit over the past two years face the most pressure from a combination of rate rises and falling values. Falling values can push the loan-to-value ratio above 80% again, which can limit refinancing options or bring back the cost of lenders mortgage insurance if switching lenders.
Why Is ASIC Suing a Network of Comparison Websites?
ASIC has commenced proceedings against Clark Family Pty Ltd, alleging it ran up to 70 websites that presented themselves as loan comparison services while selling consumers’ loan enquiries to whichever broker paid the most ASIC. The case is a reminder that a website calling itself a comparison service may have commercial arrangements that are not obvious to the person filling in the form.
Licensed mortgage brokers must act in a borrower’s best interests and disclose how they are paid, including commissions from lenders. Checking a broker’s credit licence or credit representative number on ASIC’s professional register is a quick way to confirm who you are dealing with.
Key Takeaways
- •Ten lenders lifted 266 fixed rates by an average of 0.33 percentage points in the week to 22 September.
- •All four major banks expect the RBA to raise the cash rate to 4.60% on 29 September.
- •Unemployment rose to 4.6% in August, with Victoria highest at 5.2%.
- •Mortgage demand fell 14.1% year on year in August, and first home buyer applications fell 20%.
- •29.7% of new home loans in the June quarter were written at an LVR of 80% or more.
- •ASIC is suing a company it alleges ran up to 70 comparison websites that sold loan enquiries to the highest-paying broker.