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ANZ cuts investment mortgage rates

ANZ cuts investment mortgage rates

ANZ has dropped the fixed interest rates on selected residential investment home loans, including principal and interest, interest only and interest in advance options.

The lower rates, effective from 28 May 2018, affect ANZ’s Breakfree and non-Breakfree investment loans with two-year fixed rates.

Two-year fixed rates on ANZ principal & interest residential investment loans dropped 0.11 basis points, while the two-year fixed rates for interest only and interest in advance residential investment loans fell by 0.26 basis points.

LoanOld rateChangeNew rateNew comparison rate
ANZ Fixed – Breakfree Residential Investment Loan Principal and Interest (2 years)4.19%-0.11%4.08%5.45%
ANZ Fixed – Non-Breakfree Residential Investment Loan Principal and Interest (2 years)4.34%-0.11%4.23%5.56%
ANZ Fixed – Breakfree Residential Investment Loan Interest Only (2 years)4.44%-0.26%4.18%5.46%
ANZ Fixed – Non-Breakfree Residential Investment Loan Interest Only (2 years)4.59%-0.26%4.33%5.58%
ANZ Fixed – Breakfree Interest in Advance Interest Only(2 years)4.24%-0.26%3.98%5.42%
ANZ Fixed – Non-Breakfree Interest in Advance Interest Only (2 years)4.39%-0.26%4.13%5.55%

What is Interest In Advance?

This option for interest-only residential investment mortgages involves prepaying the next year’s interest as a single lump sum rather than monthly payments. This may allow a borrower to claim additional deductions come tax time – consult a tax professional for more information.

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Fact Checked -

This article was reviewed by Property & Personal Finance Writer Nick Bendel before it was published as part of RateCity's Fact Check process.

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Learn more about home loans

When does Commonwealth Bank charge an early exit fee?

When you take out a fixed interest home loan with the Commonwealth Bank, you’re able to lock the interest for a particular period. If the rates change during this period, your repayments remain unchanged. If you break the loan during the fixed interest period, you’ll have to pay the Commonwealth Bank home loan early exit fee and an administrative fee.

The Early Repayment Adjustment (ERA) and Administrative fees are applicable in the following instances:

  • If you switch your loan from fixed interest to variable rate
  • When you apply for a top-up home loan
  • If you repay over and above the annual threshold limit, which is $10,000 per year during the fixed interest period
  • When you prepay the entire outstanding loan balance before the end of the fixed interest duration.

The fee calculation depends on the interest rates, the amount you’ve repaid and the loan size. You can contact the lender to understand more about what you may have to pay. 

What is an interest-only loan? How do I work out interest-only loan repayments?

An ‘interest-only’ loan is a loan where the borrower is only required to pay back the interest on the loan. Typically, banks will only let lenders do this for a fixed period of time – often five years – however some lenders will be happy to extend this.

Interest-only loans are popular with investors who aren’t keen on putting a lot of capital into their investment property. It is also a handy feature for people who need to reduce their mortgage repayments for a short period of time while they are travelling overseas, or taking time off to look after a new family member, for example.

While moving on to interest-only will make your monthly repayments cheaper, ultimately, you will end up paying your bank thousands of dollars extra in interest to make up for the time where you weren’t paying off the principal.

What is 'principal and interest'?

‘Principal and interest’ loans are the most common type of home loans on the market. The principal part of the loan is the initial sum lent to the customer and the interest is the money paid on top of this, at the agreed interest rate, until the end of the loan.

By reducing the principal amount, the total of interest charged will also become smaller until eventually the debt is paid off in full.

What are the different types of home loan interest rates?

A home loan interest rate is used to calculate how much you’ll pay the lender, usually annually, above the amount you borrow. It’s what the lenders charge you for them lending you money and will impact the total amount you’ll pay over the life of your home loan. 

Having understood what are home loan rates in general, here are the two types you usually have with a home loan:

Fixed rates

These interest rates remain constant for a specific period and are a good option if you’re a first-time buyer or if you’re looking for a fixed monthly repayment. One possible downside of a fixed rate is that it may be higher than a variable rate. Also, you don’t benefit from any lowering of interest rates in the market. On the flip side, if rates go up, your rate won’t change, possibly saving you money.

Variable rates

With variable interest rates, the lender can change them at any time. This change can be based on economic conditions or other reasons. Changes in interest rates could be beneficial if your monthly repayment decreases but can be a problem if it increases. Variable interest rates offer several other benefits often not available with fixed rate home loans like redraw and offset facilities and free extra repayments.