Big 4 lift rates in a big day for home loan customers

Big 4 banks lift rates in a big day for home loan customers

ANZ and NAB today announced they were lifting their variable home loan rates, joining Westpac and CBA in what is now a bulk move by the big four banks to increase their mortgage rates.

All four banks cited APRA’s requirement for the big four banks to hold more capital to make them more shock-proof.

The major banks hold around 85 per cent of all home loans in the Australian market.  What this means is that from November, the majority of Australians will be paying between $300 and $400 a year more for their variable home loan.

RateCity’s Money Editor Sally Tindall said the move goes against an increasing tide of rate cuts from some of the smaller lenders.

“These rate increases come at a time of record lows, with most experts expecting a rate cut well before any official rise in the cash rate,” she said

“The last time any of the big four banks raised interest rates across the board like this was back in April 2012.

“What’s different between 2012 and today is that it’s now far easier to switch. 

“Anyone that feels unfairly done by should shop around as there are more than 10 lenders with rates under 4 per cent and switching to one of those 4% deals could save you almost $2000 in the first year.

“The only thing holding the RBA back from a rate cut is the hot housing market. Now that all big four banks have lifted home loan rates, the RBA Governor has more than enough room to move,” she said.

ANZ CEO Australia Mark Whelan said: “This decision reflects the significant additional cost of

capital banks are now required to hold against home lending.

“Despite these additional costs, we are committed to working hard to keep lending rates as low as possible for customers,” Mr Whelan said.

NAB‘s executive in charge of personal banking, Gavin Slater, told the SMH that a range of factors were considered in the decision to hike rates.

“Today’s decision has not been easy, but we believe this is right decision for the long term. We know we have to balance the interests of our customers with the needs of our more than 550,000 shareholders.

“There are a range of factors that come into consideration in interest rate decisions. The home loan market is dynamic, with multiple changes being seen across the industry. Regulatory changes on capital requirements also increase the costs associated with providing home loans,” he said.

BIG FOUR RATE HIKES AND REPAYMENT INCREASES

Based on a $300,000 loan over 30 years for owner-occupiers:

 

Rate

Increase

New rate

Monthly

Annual

Westpac lowest variable

 

4.58%

0.20

4.78%

$36

$432

Westpac standard variable

 

5.48%

0.20

5.68%

$37

$444

CBA basic variable

 

4.75

0.15

4.90

$27

$324

CBA standard variable

 

5.45

0.15

5.60

$28

$336

NAB basic variable

 

4.15%

0.17

4.32%

$30

$360

NAB standard variable

 

5.43%

0.17

5.60%

$32

$384

ANZ basic variable

 

4.62%

0.18

4.80%

$32

$384

ANZ standard variable

 

5.38%

0.18

5.56%

$34

$408

Source: RateCity

 

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Learn more about home loans

What is a standard variable rate (SVR)?

The standard variable rate (SVR) is the interest rate a lender applies to their standard home loan. It is a variable interest rate which is normally used as a benchmark from which they price their other variable rate home loan products.

A standard variable rate home loan typically includes most, if not all the features the lender has on offer, such as an offset account, but it often comes with a higher interest rate attached than their most ‘basic’ product on offer (usually referred to as their basic variable rate mortgage).

Who offers 40 year mortgages?

Home loans spanning 40 years are offered by select lenders, though the loan period is much longer than a standard 30-year home loan. You're more likely to find a maximum of 35 years, such as is the case with Teacher’s Mutual Bank

Currently, 40 year home loan lenders in Australia include AlphaBeta Money, BCU, G&C Mutual Bank, Pepper, and Sydney Mutual Bank.

Even though these lengthier loans 35 to 40 year loans do exist on the market, they are not overwhelmingly popular, as the extra interest you pay compared to a 30-year loan can be over $100,000 or more.

How does a redraw facility work?

A redraw facility attached to your loan allows you to borrow back any additional repayments that you have already paid on your loan. This can be a beneficial feature because, by paying down the principal with additional repayments, you will be charged less interest. However you will still be able to access the extra money when needed.

Do other comparison sites offer the same service?

Real Time RatingsTM is the only online system that ranks the home loan market based on your personal borrowing preferences. Until now, home loans have been rated based on outdated data. Our system is unique because it reacts to changes as soon as we update our database.

Mortgage Calculator, Property Value

An estimate of how much your desired property is worth. 

What happens to your mortgage when you die?

There is no hard and fast answer to what will happen to your mortgage when you die as it is largely dependent on what you have set out in your mortgage agreement, your will (if you have one), other assets you may have and if you have insurance. If you have co-signed the mortgage with another person that person will become responsible for the remaining debt when you die.

If the mortgage is in your name only the house will be sold by the bank to cover the remaining debt and your nominated air will receive the remaining sum if there is a difference. If there is a turn in the market and the sale of your house won’t cover the remaining debt the case may go to court and the difference may have to be covered by the sale of other assets.  

If you have a life insurance policy your family may be able to use some of the lump sum payment from this to pay down the remaining mortgage debt. Alternatively, your lender may provide some form of mortgage protection that could assist your family in making repayments following your passing.

Remaining loan term

The length of time it will take to pay off your current home loan, based on the currently-entered mortgage balance, monthly repayment and interest rate.

What is appreciation or depreciation of property?

The increase or decrease in the value of a property due to factors including inflation, demand and political stability.

Mortgage Calculator, Repayments

The money you pay back to your lender at regular intervals. 

Interest Rate

Your current home loan interest rate. To accurately calculate how much you could save, an accurate interest figure is required. If you are not certain, check your bank statement or log into your mortgage account.

What is bridging finance?

A loan of shorter duration taken to buy a new property before a borrower sells an existing property, usually taken to cover the financial gap that occurs while buying a new property without first selling an older one.

Usually, these loans have higher interest rates and a shorter repayment duration.

What is the flexibility score?

Today’s home loans often try to lure borrowers with a range of flexible features, including offset accounts, redraw facilities, repayment frequency options, repayment holidays, split loan options and portability. Real Time Ratings™ weights each of these features based on popularity and gives loans a ‘flexibility score’ based on how much they cater to borrowers’ needs over time. The aim is to give a higher score to loans which give borrowers more features and options.

What is appraised value?

An estimation of a property’s value before beginning the mortgage approval process. An appraiser (or valuer) is an expert who estimates the value of a property. The lender generally selects the appraiser or valuer before sanctioning the loan.

How can I get a home loan with no deposit?

Following the Global Financial Crisis, no-deposit loans, as they once used to be known, have largely been removed from the market. Now, if you wish to enter the market with no deposit, you will require a property of your own to secure a loan against or the assistance of a guarantor.