Home Loan Rates To Rise

Home borrowers face higher interest rates for fixed-rate mortgages as financial markets react to the likelihood of a rise in official rates within weeks.

Eight lenders have lifted three-year fixed rates in the past week, including Citibank and HSBC, consumer information firm Infochoice.com.au says. The increases ranged from 0.1 per cent to 0.3 per cent. The average three-year fixed interest rate on offer from lenders has risen from 6.66 per cent in mid-December to 6.7 per cent.

Last week the Reserve Bank said the likelihood of a rate rise in the next few months had increased due to inflationary pressures. The warning caused the interest rates on short-term bond contracts traded on financial markets to jump sharply and investors have now factored in a 0.25 percentage point interest rate increase in early March followed by another by June.

The bond contracts that banks and other lenders use to finance fixed loans have also been rising, pressuring lenders to lift the rates on fixed-rate products.

However, new borrowers are not rushing to "lock in" their interest payments by opting for fixed mortgages. "There's no uptick in demand for fixing at this stage," an ANZ spokesman, Paul Edwards, said.

The dollar closed half a cent higher at US78.54c amid the news.