CBA falls into the big bank conga line with interest-only rate hikes

CBA falls into the big bank conga line with interest-only rate hikes

The Commonwealth Bank has followed its competitors by lifting rates for customers who opt for interest-only repayments while offering a small reward to home owners paying down their debt.

CBA owner-occupiers paying principal and interest will save $7 a month, or $84 a year, based on a $350,000 loan over 30 years, as a result of today’s announcement.

Owner-occupiers paying interest-only will pay an extra $88 a month or $1,056 a year, while investors paying interest-only will pay CBA an extra $87 a month or $1,044 a year.

RateCity.com.au CEO Paul Marshall said there is now nowhere left to hide for big four mortgage holders paying interest-only.

“The big banks have unanimously decided to hike rates for both new and existing customers despite the fact APRA’s most recent cap on interest-only was for new lending.

“If you’re an investor who wants to keep paying interest-only, your only reprieve from relatively high rates will be switching to a smaller lender.

“Right now there are still a couple of investor rates offering interest-only terms under 4 per cent, but they’re earmarked as a dying breed.

“Owner-occupiers paying down their principal will welcome the three-basis-point reduction, however the cuts aren’t exactly stacking up with the hikes.

“We would challenge the big banks to pass on more of the savings to mortgage holders who are doing the ‘right’ thing by paying off their loan.

“If borrowers feel like the big banks aren’t looking after them, they should vote with their feet and look for a more competitive home loan with a smaller lender,” Mr Marshall said.

Low-rate investor interest-only loans

Lender Loan Rate
Homestar Finance Variable Rate Investment Loan 3.84%
Freedom Lend Variable Investment Loan 3.99%

CBA standard variable rate changes

Old rate New rate Change Old monthly repayments New monthly repayments Change
Owner-occupier P&I 5.25% 5.22% -3 basis points $1,933 $1,926 -$7
Owner-occupier IO 5.47% 5.77% 30 basis points $1,595 $1.683 $88
InvestorP&I 5.80% 5.80% None $2,054 $2,054 None
Investor IO 5.94% 6.24% 30 basis points $1,733 $1,820 $87

(Calculations based on the average-sized Australian loan of $350,000, over 30 years.)

Big four banks – standard variable rates

Owner-occupier P&I Owner-occupier IO Investor P&I Investor IO
ANZ 5.20% 5.75% 5.80% 6.26%
CBA 5.22% 5.77% 5.80% 6.24%
NAB 5.24% 5.77% 5.80% 6.25%
Westpac 5.24% 5.83% 5.79% 6.30%

 

 

 

 

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What happens to my home loan when interest rates rise?

If you are on a variable rate home loan, every so often your rate will be subject to increases and decreases. Rate changes are determined by your lender, not the Reserve Bank of Australia, however often when the RBA changes the cash rate, a number of banks will follow suit, at least to some extent. You can use RateCity cash rate to check how the latest interest rate change affected your mortgage interest rate.

When your rate rises, you will be required to pay your bank more each month in mortgage repayments. Similarly, if your interest rate is cut, then your monthly repayments will decrease. Your lender will notify you of what your new repayments will be, although you can do the calculations yourself, and compare other home loan rates using our mortgage calculator.

There is no way of conclusively predicting when interest rates will go up or down on home loans so if you prefer a more stable approach consider opting for a fixed rate loan.

How much are repayments on a $250K mortgage?

The exact repayment amount for a $250,000 mortgage will be determined by several factors including your deposit size, interest rate and the type of loan. It is best to use a mortgage calculator to determine your actual repayment size.

For example, the monthly repayments on a $250,000 loan with a 5 per cent interest rate over 30 years will be $1342. For a loan of $300,000 on the same rate and loan term, the monthly repayments will be $1610 and for a $500,000 loan, the monthly repayments will be $2684.

What is a valuation and valuation fee?

A valuation is an assessment of what your home is worth, calculated by a professional valuer. A valuation report is typically required whenever a property is bought, sold or refinanced. The valuation fee is paid to cover the cost of preparing a valuation report.

Monthly Repayment

Your current monthly home loan repayment. To accurately calculate how much you could save, an accurate payment figure is required. If you are not certain, check your bank statement.

How much information is required to get a rating?

You don’t need to input any information to see the default ratings. But the more you tell us, the more relevant the ratings will become to you. We take your personal privacy seriously. If you are concerned about inputting your information, please read our privacy policy.

Mortgage Calculator, Deposit

The proportion you have already saved to go towards your home. 

How much deposit do I need for a home loan from NAB?

The right deposit size to get a home loan with an Australian lender will depend on the lender’s eligibility criteria and the value of your property.

Generally, lenders look favourably on applicants who save up a 20 per cent deposit for their property This also means applicants do not have to pay Lenders Mortgage Insurance (LMI). However, you may still be able to obtain a mortgage with a 10 - 15 per cent deposit.  

Keep in mind that NAB is one of the participating lenders for the First Home Loan Deposit Scheme, which allows eligible borrowers to buy a property with as low as a 5 per cent deposit without paying the LMI. The Federal Government guarantees up to 15 per cent of the deposit to help first-timers to become homeowners.

Mortgage Calculator, Repayments

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

Mortgage Calculator, Repayment Type

Will you pay off the amount you borrowed + interest or just the interest for a period?

How is the flexibility score calculated?

Points are awarded for different features. More important features get more points. The points are then added up and indexed into a score from 0 to 5.

How will Real Time Ratings help me find a new home loan?

The home loan market is complex. With almost 4,000 different loans on offer, it’s becoming increasingly difficult to work out which loans work for you.

That’s where Real Time RatingsTM can help. Our system automatically filters out loans that don’t fit your requirements and ranks the remaining loans based on your individual loan requirements and preferences.

Best of all, the ratings are calculated in real time so you know you’re getting the most current information.

How long does NAB home loan approval take?

The time required to get your home loan from NAB approved can vary based on a number of factors involved in the application process. 

Once you have applied for a home loan, a NAB specialist will contact you within 24 hours over the phone to take down relevant information, including your total income, debts (existing loans, credit cards, etc.), assets (car, shares, etc.), and your monthly expenses (food, utility bills, etc.). Your lender might also ask for information related to the property you want to purchase, including the type of dwelling and preferred postcode.

NAB will then verify all your information and check your credit score, and if the details stack up, you should be given a conditional approval certificate. This certificate stipulates how much money NAB is willing to lend you and is typically valid for 90 days. 

Once you have your conditional approval, you can start browsing for properties that you like and that fit within the budget that NAB has provided. After you find a suitable property, you’ll need to give a copy of the signed deed to NAB, following which you should get full approval and access to the funds. This process can take up to 4-6 weeks. 

What is an ombudsman?

An complaints officer – previously referred to as an ombudsman -looks at formal complaints from customers about their credit providers, and helps to find a fair and independent solution to these problems.

These services are handled by the Australian Financial Complaints Authority, a non-profit government organisation that addresses and resolves financial disputes between customers and financial service providers.

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.