Banks Move to End ‘Mortgage Wars’: What Borrowers Need to Know
In recent months, lenders have been quietly adjusting their mortgage rates and pulling back on key incentives, signaling an end to what experts have dubbed the “mortgage wars.” Despite the Reserve Bank of Australia (RBA) keeping the cash rate steady, banks are making moves to shore up their bottom lines and prepare for potential rate cuts later in the year.
According to industry experts, the days of banks enticing customers with cashbacks and other incentives seem to be fading. Peter Marshall, a banking and rates expert at Mozo, highlighted the shift in the home loan market away from intense competition among lenders. This move suggests a redirection of efforts toward enhancing profit margins amidst expectations of future rate cuts by the end of 2024.
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Recent data from the Australian Bureau of Statistics (ABS) indicates a decline in lending since July, with variable loan rates steadily increasing across various banking products. Some lenders have raised rates by as much as 30 percent on certain loan products, despite no movement in the cash rate by the RBA.
One notable example is Auswide, which raised its headline variable rate from 5.99 percent to 6.09 percent between December 2023 and January 2024. Marshall emphasized the importance for borrowers to monitor rate adjustments from lenders regularly, irrespective of RBA decisions.
While competition among banks for new mortgages has decreased, there’s a silver lining for borrowers considering fixed-rate options. Mozo reported a downward trend in fixed rates, with 13 lenders cutting rates in January, albeit by modest margins. Additionally, most lenders are extending fixed-rate terms, making these products increasingly attractive to mortgage holders.
In summary, borrowers should stay vigilant about rate movements and be proactive in reviewing their mortgage terms. With the mortgage landscape evolving rapidly, keeping a close eye on lender offerings and considering fixed-rate options could prove beneficial in navigating the changing market dynamics.
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