Mortgage lenders, including the big four banks, have raised the cost of nearly 130 products in the past four weeks, driving increasing numbers of borrowers into fixed rates, analysis of lending data reveals.
More increases are expected new year because of the knock-on effect of the US Federal Reserve raising rates, which means the cost of international money used to fund mortgages will rise, even as the likelihood of the Reserve Bank of Australia raising cash rates becomes more remote.
Lenders are also attempting to protect profit margins from rising regulatory expenses and pressure to boost their share of the deposit market.
Fixed rate loans have increased the most and by the largest amounts as lenders off-set the cost of locking in long-term finance.
For example, 38 three-year term and 32 five-year term loans have been increased by up to 31 and 65 basis points respectively, the analysis by Canstar, a financial services data company, reveals.
The numbers are based on a $1 million principal and interest loan with an 80 per cent loan-to-value ratio.
Only five one-year rates have been increased, less than half the number of standard variable increases.
The amount of ranges from 9 basis points for a one-year fixed rate to 40 basis points for a five-year loan. Some variable rates for new investment loans with loan to value ratios of more than 80 per cent have increased by 80 basis points.
"The bad news for anyone who has been waiting for the bottom of the rate cycle is that it has come and gone," says John Flavell, chief executive of Mortgage Choice, a listed national network of mortgage brokers. "Australia's lenders will continue to lift interest rates throughout next year."
Nearly one-in-five loans recommended by Mortgage Choice is a fixed rate, an increase of 2 per cent in the past month as more borrowers attempt to lock in cheap fixed rate that are still below 4 per cent, Mr Flavell said.
Analysts expect rates will rise by about a half-percentage point over the next 12 months, which means additional annual payments on the average mortgage of about $1200. The nation's national average is about $444,000, rising to $544,000 in Sydney.
AMP, the nation's largest financial conglomerate, will announce on Monday that it has increased rates for all two-, three- and five-year for owner-occupied loans.
"This decision was taken due to a number of factors, including market volatility, increasing wholesale funding costs and the need to maintain a balanced portfolio in line with regulatory requirements," an AMP spokesman said.
The size of the increase has yet to be announced. It is imposing a 15 basis point fee to lock in a fixed rate for applications received before 19 December. Later applications will be charged 25 basis points.
Other banks, such as ME Bank, which is owned by 29 industry funds, and Commonwealth Bank of Australia, the nation's largest mortgage lender, are increasing reference rates, which is a base rate below the interest rate and is used by lenders to negotiate discounts.
ME will increase the reference rate for all variable products by 10 basis points from January 4.
CBA has yet to announce an increase but hinted at rises by warning mortgage brokers they are "subject to change".
Some brokers are speculating lenders will use rising reference rates to restrict deep discounts for borrowers.
