Since this latest round of pricing activity started it has gradually shifted from the floating and short term rates out along the curve.
The five year rate is an interesting space. Some borrowers like it as it provides long term certainty around interest payments.
However, the catch can be that if you lock into a long term rate and then other rates fall significantly they look expensive.
As we have seen over the years borrowers who want to quit a long rate early end up having to pay break fees to their lender – and these can be horrendously expensive.
Westpac has taken both its four and five year rates to 5.99% which, on an historical basis, is very attractive.
It has matched SBS and its fully owned subsidiary HBS as market leaders in this space.
We have done a slightly different graph than usual. It is a good one though as it shows clearly the leaders in the five-year space and then shows that most of the competitor banks are all sitting in a roughly the same area, but well above Westpac and SBS.
The question is will they follow the leaders.
The outliers with the expensive rates tend to be the smaller non-bank lenders.
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