Beware the major banks lifting interest rates.

As we know the RBA has made it very clear that it won’t be pushing up the official cash rate until 2023 or 2024. But that doesn’t mean the banks won’t.
 
The banks know it’d be madness to hike variable rates as we still sit in the grips of a global pandemic, but unfortunately the same can’t be said about long term fixed rates, which all the lenders have increased over recent weeks.  

The three and four year fixed rates have been the first to move, so from here we can either expect those to go up further, or the banks might move on the 2 year rate.

So the question is, why are the banks moving on their fixed rates?

The answer is the cost of funding has gone up as a response to higher bond yields globally, which means the banks are paying more in wholesale funding from foreign and local investors.

What does that mean for you and me?
 
It means we should be looking at our property plans over the next few years and considering our options.
 
My feeling is that if you think you’re going to be in your current property for more than 3 years, and if you feel there is a part of your mortgage that is not likely to be in an offset account against the loan, it is well worth considering fixing part of your loan at today’s historically low rates, before the banks hike them up even further.