RateCity research director Sally Tindall said the major banks’ reductions recently could be an early sign some fixed rates are on their way down. At the same time, banks have been trying to rein in some of the more aggressive discounts they are offering on variable-rate loans, and Tindall said none of the big four banks had an advertised variable rate under 6 per cent.
Westpac last week raised one of its advertised variable rates for new customers, and Tindall said this was the 22nd rise to new customer rates from a big four bank since March. She said this trend showed “a strategic move to walk away from the cut-throat competition in the home loan market”.
She said it was unlikely that variable rates among the big four would return below 6 per cent until the Reserve Bank began cutting the cash rate.
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As banks raised their variable rates, the number of customers choosing to fix their home loans has risen, albeit from low levels. Gilfillan said the proportion of customers choosing fixed rates had doubled over the past three months to 9.4 per cent in July, although it remains below the peak of 46 per cent in July 2021 when banks were offering ultra-low fixed rates.
Morningstar analyst Nathan Zaia said banks may have lowered their fixed rates recently to attract customers who were coming to the end of their previous fixed-rate contracts.
“The banks are probably looking for a way to lock their customers in, at least for a few years,” he said, as the mortgage rate cliff plays out.
Banks have signalled their intentions to walk away from cut-throat competition in the past few months in an effort to protect their margins, and have been less generous in some of the discounts they are offering customers on variable-rate loans.
“The banks are still offering very competitive pricing, but they’re not competing as hard,” Zaia said.
Once banks have made their repayments to a pandemic-era RBA funding program called the term funding facility (TFF), Zaia said the intensity of competition would probably fade.
“If the cash rate starts falling, they may not pass all the decreases on to borrowers,” he said. “Once they’re past the TFF repayments, banks will have more flexibility and there’s really little incentive for them to compete hard.”
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