Last week, several major lenders and some second-tier lenders increased their interest only variable interest rates in an attempt to meet APRA's limit on new interest only lending which is currently set at 30% of new residential mortgage lending for the major lenders.
Lenders are clearly favouring owner occupied mortgages on principal and interest repayment structures and have offered reductions on variable interest rates for home loans. However, for those on interest only repayments, interest rates have increased.
Recent lender changes
St George
- Owner occupier principal & interest home loan variable rate will reduce by 0.08% p.a.
- Owner occupier interest only home loan variable rate will increase by 0.31% p.a.
- Residential investment interest only home loan variable rate will increase by 0.34% p.a.
These changes will be effective Friday 30 June 2017.
ANZ
- Variable interest rates for customers paying principal and interest on their home loans will reduce by 0.05%.
- Variable interest-only home loan rates for investors and owner-occupiers will increase by 0.30%.
These changes will be effective 16 June 2017.
NAB
- The variable interest rate for owner occupiers making principal and interest repayments will reduce by 0.08% p.a.
- The variable interest rate for owner occupiers making interest only repayments will increase by 0.35% p.a.
- The variable interest rate for residential investors making interest only repayments will increase by 0.35% p.a.
These changes will be effective 30 June 2017.
Westpac
- The variable interest rate for owner occupiers making principal and interest repayments will reduce by 0.08% p.a
- The variable interest rate for owner occupiers making interest only repayments will increase by 0.34% p.a.
- The variable interest rate for residential investors making interest only repayments will increase by 0.34% p.a.
These changes will be effective 30 June 2017.
Suncorp
- The variable interest rate for owner occupiers making principal and interest repayments will reduce by 0.10% p.a
- The variable interest rate for owner occupiers making interest only repayments will increase by 0.12% p.a.
- The variable interest rate for residential investors making interest only repayments will increase by 0.12% p.a.
These changes will be effective 3 July 2017.
Will my interest rate discount still apply?
Yes, if you’ve been given a discount on your interest rate, this will still apply to the loan. If you have a split loan with a portion on variable, the increase/decrease will only apply to the variable component.
Should I change to P&I or fix my loan?
Lenders are starting to favour customers on Principal and Interest (P&I) and therefore offering incentives to move to P&I repayments. Most lenders are offering to waive renegotiation fees for existing customers wanting to switch from interest only to P&I repayments.
In our update in January, we reported that 2017 is ‘The year of the fixed interest rates’ as it is likely we will see more increases to variable interest rates, particularly for interest-only structures. Fixing your interest rate depends on your individual strategy and you need to consider the costs and restrictions of fixed interest rates such as no offset facility.
Should I change lenders to get a cheaper interest rate?
For the last few years, the majors have been leading in both terms of serviceability (how much you can borrow) and low interest rates. There have been significant changes to credit policy and interest rates across the major banks and second tier lenders over the last 6 months. Whilst there are other lenders with lower interest rates, there are often hidden costs or policy restrictions that make borrowing from them more expensive. To ensure you are getting the best deal, give us a call and we can let you know if your current deal is the most appropriate.