Lenders are quietly raising fixed-rate mortgages by up to 45 basis points

Firstmac, Australia’s largest non-bank lender, and nine other smaller lenders are quietly raising fixed-rate mortgages by up to 45 basis points in a move expected to be followed by other lenders as the “Trump effect” begins to bite local borrowers.

“International funding costs are rising, which is the fallout from the ‘Trump effect,’” said Martin North, principal of Digital Finance Analytics (DFA), a boutique research, analysis, and consulting firm that provides advisory services to financial services companies. US President-elect Donald Trump has proposed a large increase in infrastructure spending and large tax cuts, which would impact the cost of capital.

“There is no doubt global markets are pricing in a rise in rates in the medium-term, and that has now been aggravated by expectations of higher inflation if Mr. Trump implements his election promises,” said Marie Mortimer, managing director at loans.com.au, Australia’s largest online lender.

loans.com.au, has raised rates by up to 13 basis points on both its investor and owner-occupied fixed rates. In June, the online lender cut its three-year fixed-rate home loan by 32 basis points to 3.67%. It warned at the time it was probably at the bottom of the cycle for fixed rates.

This week, loans.com.au increased its three-year rate to 3.89%.

Firstmac has increased one to three-year rates on its owner-occupier and investor rates by up to 13 basis points. Owner-occupied rates have increased up to 4.09% and investor rates have increased up to 4.34%.

"When lenders start to lift the pricing on their fixed rates the variable rates don't tend to fall any lower," said Jessica Darnbrough, head of corporate affairs at Mortgage Choice, a Sydney-based company that represents mortgage brokers.

Nine other lenders have increased their fixed rates by up to 45 basis points across several of their products.

P&N Bank, the largest member-owned bank in Western Australia, has raised rates on fixed two-, four-, and five-year principal and interest, as well as interest-only products, by up to 10 basis points.

“I am expecting rises in mortgage rates over the summer,” North said. “If the US [does] turn on the debt tap to fund infrastructure builds, this is likely to drive rates up. I know the banks have more deposit funding now, but they are still caught in the draft of international rate movements.”