Australian house prices rise in June before banks increase their fixed-rate mortgages

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The FOMO Factor That Will See Home Prices Rise in June, Saving Borrowers $400 a Month — But Here’s Why You Should Be Very Worried

  • From the end of this month, banks will no longer have access to special funds
  • Reserve Bank set up financing for banks last year to provide cheap home loans
  • Shane Oliver of AMP Capital said borrowers would rush to get a loan
  • Chief economist predicted 2% fixed interest rate to double to 4% by 2024

Australian home buyers will flock to the property market this month before banks end the era of ultra-low mortgage rates.

From July, the banks will start increasing their three-year fixed-rate loans, making 2 percent fixed-rate loans a thing of the past.

The Reserve Bank of Australia’s generous funding for ultra-cheap home loans will run out on June 30.

A borrower who pays off a $500,000 house can save $400 a month if he switches his entire mortgage from a floating rate of 3 percent to a fixed rate of 2 percent within the next four weeks.

Shane Oliver, chief economist at AMP Capital, said Australian home buyers were likely to take out a loan this month, leading to another monthly rise in property prices.

“As we hear more and more talk about ‘fixed rates have bottomed out’, I suspect we will see more of a rush for people to enter the property market,” he told Daily Mail Australia.

Australian home buyers will flock to the property market this month before banks end the era of ultra-low mortgage rates.  From July, the banks will start increasing their three-year fixed-rate loans, making 2 percent fixed-rate loans a thing of the past.  Pictured is an auctioneer in Strathfield in Sydney's outback in May 2021

Australian home buyers will flock to the property market this month before banks end the era of ultra-low mortgage rates. From July, the banks will start increasing their three-year fixed-rate loans, making 2 percent fixed-rate loans a thing of the past. Pictured is an auctioneer in Strathfield in Sydney’s outback in May 2021

“It can have a psychological impact, it’s another sign that the days of 2 percent fixed mortgage rates are probably coming to an end.”

Sally Tindall, research director at RateCity.com.au, said more fixed interest rates will rise from July.

“We expect more fixed rates to rise after the RBA’s term financing facility expires at the end of this month and we get closer to the next rate hike,” she said.

During the onset of the Covid pandemic in March last year, the Reserve Bank of Australia launched the $90 billion term financing facility to fund low-cost loans.

The program was expanded, with $134 billion to the banks so far, so they could provide borrowers with ultra-cheap three-year fixed-rate loans.

The banks have until June 30 of this year to commit the financing of the remaining $75 billion so that borrowers can have very cheap lending rates until June 2024.

Dr. Oliver said home borrowers, who now enjoy a fixed interest rate of 2 percent, should be prepared for their mortgage levels to double to 4 percent in three years after the fixed-rate period expires.

“They should warn them: 2024 is the big one to watch,” he said.

From July, the banks will increase their three-year fixed-rate loans, making 2 percent fixed-rate loans a thing of the past.

From July, the banks will increase their three-year fixed-rate loans, making 2 percent fixed-rate loans a thing of the past.

From July, the banks will increase their three-year fixed-rate loans, making 2 percent fixed-rate loans a thing of the past.

Four-year fixed rate is no longer available after BankVic increased its longer-term fixed rate from 1.95 percent to 2.29 percent.

Three of Australia’s four major banks, excluding ANZ, still offer fixed rates of less than 2 percent, while the Reserve Bank’s spot interest rate is at a record low of 0.1 percent.

BCU has the lowest one-year fixed rate of 1.67 percent, while Reduce Home has the lowest variable rate of 1.77 percent with other lenders since raising their fixed rates.

The Westpac Bank expects Australian house prices to rise 15 percent in 2021 and slow to 5 percent in 2022.

A borrower who pays off a $500,000 house can save $400 a month if he switches his mortgage from a variable to a low fixed rate within the next four weeks.  Pictured is a house in Perth for sale for so much

A borrower who pays off a $500,000 house can save $400 a month if he switches his mortgage from a variable to a low fixed rate within the next four weeks.  Pictured is a house in Perth for sale for so much

A borrower who pays off a $500,000 house can save $400 a month if he switches his mortgage from a variable to a low fixed rate within the next four weeks. Pictured is a house in Perth for sale for so much

Dr. Oliver predicts Sydney house prices will rise 20 percent in 2021, but slow to 7 percent next year.

Property values ​​for a detached house in Sydney are up 15.1 percent since January, CoreLogic data for May shows.

Sydney house prices rose another 3.5 percent last month and Dr. Oliver predicted a 2.5 percent increase for June was likely before the end of very cheap fixed-rate mortgages slowed the growth rate.

“We’ve probably seen the fastest growth rate,” he said.

“The rate of growth will slow to more sustainable levels due to poor affordability and higher fixed mortgage rates.”

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