Interest rate war is over as lenders make out-of-cycle rate hikes

Woman raises 'no no' ringer by line art of a house because lenders are hiking home loans out of cycle.

The last two months have seen a pause in the Reserve Bank of Australia’s rate-tightening cycle. With the cash rate held at 4.10%, lenders haven’t faced additional pressure to hike interest rates on their home loans – bringing some relief to mortgage payments. Or so we thought.

Despite the lack of RBA rate hikes in July and August, many lenders tracked in the Mozo database have increased the interest rates on their home loan offerings. While some fixed rates have received cuts, variable rates – especially on the lowest offers – have seen spikes between 5 and 15 basis points.

Some of the offending lenders include Australia’s Big Four Banks (Commonwealth Bank, ANZ, Westpac, and NAB) and major players like Macquarie, Bank of Queensland, and Qudos Bank. 

So why are lenders still raising rates, even when the RBA isn’t?

Why some lenders have raised interest rates despite RBA rate pause

Collage of a man shouting on a megaphone because the home loan rate war is over.

Mozo banking expert Peter Marshall says the reason lenders are still raising home loan interest rates is simple. “Because they can.”

Many buyers walked away from buying in the market during the height of the rate rise cycle. With limited customers on offers, banks and lenders made an effort to sweeten home loan and savings account deals with exciting offers, such as cashback refinancing and introductory rates. Six months ago, dozens of cashback offers were up for grabs: now, there are 10.

But now that buyers are flocking to the spring property market and rate hikes have plateaued, lenders have far less competition. 

“The home loan rate war is over,” explains Marshall. “If they’re all increasing their lowest rates, then there’s just no competition between them.”

“Lenders have obviously decided somewhere along the line that fighting it out for customers who want to cut the price of their mortgage is not their game anymore. The competition for customers is pretty much gone.”

Marshall calls this a natural shift as the market acclimatises to the RBA’s tight monetary policy. However, what’s eyebrow-raising is that even when interest rates come down, the competition for customers may remain chilly among banks.

“My view is that the home loan rate war won’t start again because more people will be looking for mortgages,” says Marshall.

“Property prices will be going up, too, so they’ll want larger mortgages. The banks won’t need to offer sweeteners – plenty of people will knock at their doors.”

So what options do Australians have when it comes to finding the best interest rates

Compare, compare, compare. Not every lender is raising interest rates – ING broke from the trend in July by slashing 10 bp off its Mortgage Simplifier loan. The grass may not always be greener on the other side, but you don’t know if you don’t look. 

“Just because your lender is increasing the rate doesn’t mean there’s no point looking around for a better deal – because there probably will be,” says Marshall. 

Compare low interest rate home loans in the table below.

Compare low interest rate home loan offers - last updated 23 April 2024

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    Express Home Loan

    Owner Occupier, Principal & Interest, LVR <90%

    interest rate
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    Initial monthly repayment
    6.01% p.a. variable
    6.14% p.a.

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    Owner Occupier, Principal & Interest, LVR <60%

    interest rate
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    Initial monthly repayment
    6.14% p.a. variable
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    Owner Occupier, Principal & Interest, LVR 70-80%

    interest rate
    comparison rate
    Initial monthly repayment
    6.24% p.a. variable
    6.48% p.a.

    Competitive variable rate. Multiple offset accounts available. Borrowers can also make extra repayments. Redraw facility available. Simple online application process.

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  • Fixed Rate

    Owner Occupier, Principal & Interest, <80% LVR

    interest rate
    comparison rate
    Initial monthly repayment
    6.54% p.a.
    fixed 2 years
    7.10% p.a.

    Enjoy up to $3000 cashback for eligible first home buyers and $2000 cashback for refinancers on eligible home loans with the ANZ Fixed Rate Home Loan. Get the security of repayment certainty with a competitive locked in rate. No ongoing fees to pay. Offset account on 1-year fixed loans ($10/month fee applies). Interest-only payments allowed.

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* 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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