Before a key Reserve Bank meeting this week, Australia’s biggest banks have been pushing up their fixed rates and walking away from the ultra-competitive approach they took to attract customers to this type of mortgage during the pandemic.

NAB increased its fixed rates for owner-occupiers and investors on Friday for the second time in a week – meaning some rates rose by up to 0.5 percentage points within the space of eight days – in a sign the big banks are seeking to offset rising funding costs.

It follows similar hikes by CBA, Westpac and ANZ earlier this month, leaving no fixed rates among the big four banks below 6 per cent. The changes only affect rates on new fixed-rate loans, not the rates paid by existing customers.

RateCity research director Sally Tindall said banks were no longer interested in offering the lowest fixed rates on the market because of factors including an increase in their funding costs.

“There’s been a significant rise in the cost of funding in the last 12 months which has flowed through to both fixed and variable rates,” she said. “Rising cash rates have made the cost of funding expensive all over the world.”

Fixed-rate mortgages have historically played only a small role in Australia, but the extraordinary fiscal stimulus of the COVID-19 pandemic changed all that. Banks slashed fixed-interest mortgage rates to less than 2 per cent in many cases, and customers leapt at the opportunity to borrow so cheaply, causing fixed-rate lending levels to surge.

“Banks were fighting tooth and nail for customers during COVID but refinancing has become costly for banks, so they want the churn to stop,” Tindall said. “When it comes to banks lifting their fixed rates, it’s more a matter of why not.”

Competition for fixed-rate customers has eased. While in July 2021, a record Australian high – 46 per cent – of new and refinancing customers were on fixed rates, Tindall said that figure had now “fallen off a cliff” to about 5 per cent.