Only one major bank now offers mortgage rates below 2 per cent, after Westpac ditched its 2-year 1.99 per cent variable rate on Thursday.
Previously, borrowers could access Westpac’s 1.99 per cent Flexi First Option rate for two years, before the rate reverted to 2.49 per cent ongoing. Westpac has now increased rates some four times this month, after hiking fixed rates on 16 November.
Under the most recent changes, Westpac’s introductory variable rate will now be 2.19 per cent ongoing for borrowers paying principal and interest with a loan-to-value ratio of up to 70 per cent.
The changes mean NAB is now the only major bank offering interest rates below 2 per cent.
1 yr fixed
2 yr fixed
3 yr fixed
4 yr fixed
5 yr fixed
“Westpac first dropped its lowest variable rate to 1.99 per cent just over three months ago, and while this sub-2 per cent rate was only ever an introductory one, it played a significant role in driving other variable rates down,” RateCity.com.au research director Sally Tindall said.
However, Tindall welcomed the change, explaining that simplifying the introductory rate so that it didn’t change after two years was a necessary move.
“One competitive ongoing rate is easier for customers to understand and compare, not to mention simpler for the bank to execute,” she said.
“The average new borrower will initially pay more than customers on the old rate, however, if they’re still on the same loan after 3 years and 4 months, they will pay less interest in total.”
RateCity has 66 variable rates under 2 per cent on its platform, although it predicts this number will fall in 2022 as banks prepare for the Reserve Bank of Australia (RBA) to hike the official interest rates.
“It’s possible a handful of lenders will hold on to a variable rate that starts with a ‘1’ until the RBA makes an official move as a marketing tool,” Tindall said.
She also predicts fixed rates will continue to keep rising across 2022, in line with the broader improvement in the global economy.
“We expect the pace at which fixed rates rise will slow in the first few months of 2022, however, it could pick up again as we approach an official cash-rate hike here in Australia,” she said.