Fixed rate home loans on the rise: will variable rates follow?

Ladder with coins representing home loan rate hikes

Home loan fixed rates are on their way back up, and new figures confirm this. According to Mozo data, about a quarter of lenders in our database have lifted their longer term offers this year. 

Our number crunch reveals at least 25 out of 99 lenders have bumped up their fixed rates since January, with the majority being for 4 or 5-year terms. 

UBank is the one of the latest providers to join this trend. The online lender last week raised its 3-year fixed rates from 1.75% (2.22% comparison rate*) to 1.85% (2.24% comparison rate*). Despite this 10 basis point increase though, UBank still maintains its lead as the lowest 3-year fixed rate for owner occupiers in the Mozo database. 

Westpac and the rest of the Westpac Group (BankSA, Bank of Melbourne, St.George) also made similar moves with their 4-year and 5-year fixed rates last week, pushing these offers up by 30 basis points. 

Mozo’s senior research analyst, Mitchell Pollard said this emerging trend of fixed rate hikes comes in light of improvements in Australia’s economic outlook. 

“In the last year or so, we saw the banks price their fixed rates quite aggressively so that they could keep customers on and lock them in for 3, 4 or 5 years in one go. They felt safe doing so, knowing that inflation and therefore the cash rate would stay low for a long time,” he said.

“But fast forward to today and a quarter of lenders [in the Mozo database] have adjusted their longer-term rates back up in some amount. They’re not huge amounts, but it’s a sign that banks are placing their bets on the future looking brighter in four or five years’ time, thanks to the vaccines and lots of stimulus here and abroad. 

“That’s what fixed rates are essentially - they’re a bet on where interest rates are going to be in a few years.”

So will variable rates follow suit? 

Unlike fixed rates, variable rates can change at any time, whether it’s in line with the cash rate or based on the bank’s own competitive analysis. With inflation still very low at the moment, Pollard says it may be a number of years before variable rates rise again. 

The Reserve Bank has previously stated that it will not increase the cash rate until inflation is “sustainably within the 2-3% target range”. That condition likely won’t happen soon, given that the Consumer Price Index (CPI) - a measure of inflation - rose by a less-than-expected 0.6% over the March quarter. 

However, Pollard says the fixed rate hikes are an early indication that variable rates may begin climbing back up in four or five years. 

“With variable rates, banks don’t face the risk of potentially losing interest margins to customers locked into a low rate in a rising market. The only risk for them is that borrowers might switch to a more competitive lender. So right now the banks are in no rush to raise variable rates until the cash rate is adjusted upwards,” he says. 

To fix or not to fix? 

If you’re worried about home loan rates bouncing back from historic lows, now could be a good time to consider fixing your rate.

Here’s a breakdown of where average fixed rates in the Mozo database currently sit for owner occupiers making principal and interest repayments: 

  • 1-year fixed term average: 2.33%
  • 2-year fixed term average: 2.28%
  • 3-year fixed term average: 2.32%
  • 4-year fixed term average: 2.46%
  • 5-year fixed term average: 2.68%

Just beware that if your lender bumps up its fixed rates before you’ve reached settlement, you would be put on the new higher offer. Some providers do offer a ‘rate lock’ feature which guarantees you the current rate for 60 or 90 days, but this perk can cost hundreds of extra dollars. 

Meanwhile, if you’re also looking for more flexibility such as an offset account or unlimited fee-free extra repayments (that would usually come with variable rate home loans), then a split loan could be up your alley instead. This option means that a portion of your loan gets secured under a fixed rate, while another portion is put on a variable rate, helping you make the most of both worlds. 

Want to weigh up your options? Scroll down below for a snapshot of fixed rate offers, or head on over to our fixed rate home loans comparison hub to view even more deals.

Compare fixed rate home loans - last updated 9 December 2023

Search promoted home loans below or do a full Mozo database search . Advertiser disclosure
  • Home Fixed Rate

    Owner Occupier, Principal & Interest, Refinance Only

    interest rate
    comparison rate
    Initial monthly repayment
    6.40% p.a.
    fixed 4 years
    6.24% p.a.

    Enjoy the security of a competitive fixed interest rate from Up. No application, monthly, annual, redraw, or discharge fees to pay. Up to 50 free offset accounts available. Up home loans are only available to owner-occupiers buying or refinancing in major Australian cities. Up is 100% owned by Bendigo Bank. New joiners get $10 by signing up to the app using code UPHOMEMOZO. (T&Cs apply). Mozo Experts Choice award winner.

  • Basic Home Loan

    Fixed, Investment, Principal & Interest, LVR 70-80%

    interest rate
    comparison rate
    Initial monthly repayment
    6.79% p.a.
    fixed 3 years
    6.64% p.a.

    Lock in repayments from 1 to 5 years. Competitive rate tiers depending on your LVR. No application or annual fee. Fast, secure online application.


* WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate displayed is for a secured loan with monthly principal and interest repayments for $150,000 over 25 years.

** Initial monthly repayment figures are estimates only, based on the advertised rate. You can change the loan amount and term in the input boxes at the top of this table. Rates, fees and charges and therefore the total cost of the loan may vary depending on your loan amount, loan term, and credit history. Actual repayments will depend on your individual circumstances and interest rate changes.

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