February finishes with mortgage rate rises

February finishes with mortgage rate rises

Several lenders increased variable interest rates on selected home loans in the last week of February, though there were also cuts to some fixed rate loans.

Auswide increased both its fixed and variable rates for owner occupiers and investors, with the smallest increase being by 3 basis points, and the largest increases being by 30 basis points. 

Auswide Home Loan New Rate New CR Old Rate Old CR Rate changes
Freedom Package Home Loan Plus Discount Fixed (Principal and Interest) 3 Years 3.79 4.6 3.76 4.59 0.03
Freedom Package Home Loan Plus Discount Variable (Principal and Interest) (LVR < 90%) 3.69 4.08 3.64 4.03 0.05
Home Loan Plus (Interest Only) 5.61 5.76 5.48 5.63 0.13
Home Loan Plus (Principal and Interest) 5.61 5.76 5.48 5.63 0.13
Line of Credit Home Loan 6.06 5.93 0.13
Line of Credit Investment Loan 6.58 6.45 0.13
Freedom Package Home Loan Plus (Principal and Interest) (LVR 90%-95%) 4.53 4.9 4.38 4.76 0.15
Investment Loan Plus (Interest Only) 6.39 6.54 6.23 6.38 0.16
Investment Loan Plus (Principal and Interest) 6.39 6.54 6.23 6.38 0.16
Freedom Package Home Loan Plus Fixed (Principal and Interest) 4 Years (LVR 90%-95%) 4.9 4.94 4.7 4.87 0.2
Freedom Package Home Loan Plus Fixed (Principal and Interest) 5 Years (LVR 90%-95%) 5 5.01 4.8 4.93 0.2
Freedom Package Home Loan Plus Fixed (Principal and Interest) 1 Year (LVR 90%-95%) 4.39 4.76 4.09 4.73 0.3
Freedom Package Home Loan Plus Fixed (Principal and Interest) 2 Years (LVR 90%-95%) 4.49 4.78 4.19 4.72 0.3
Freedom Package Home Loan Plus Fixed (Principal and Interest) 3 Years (LVR 90%-95%) 4.49 4.78 4.19 4.71 0.3

Several of MyState Bank’s variable interest rates were also increased this week, with selected interest-only home loans seeing rate rise by 10 basis points, while some principal and interest loans increased their interest by 25 basis points.

MyState Bank Home Loan Rate New CR Old Rate Old CR Rate change
Basic Variable Home Loan (Interest Only) (LVR < 80%) 4.18 3.94 4.08 3.93 0.1
Basic Variable Investment Loan (Interest Only) (LVR < 80%) 4.38 4.16 4.28 4.15 0.1
Basic Variable Investment Loan (Interest Only) (LVR 80%-90%) 4.58 4.38 4.48 4.37 0.1
Special Residential Home Loan (Interest Only) (LVR < 80%) 4.38 4.16 4.28 4.15 0.1
Special Residential Investment Loan (Interest Only) (LVR < 80%) 4.58 4.36 4.48 4.35 0.1
Special Residential Investment Loan (Interest Only) (LVR 80%-90%) 4.78 4.58 4.68 4.57 0.1
Standard Variable Home Loan (Interest Only) 5.62 5.42 5.52 5.41 0.1
Standard Variable Investment Loan (Interest Only) 5.62 5.42 5.52 5.41 0.1
Basic Variable Home Loan (Principal and Interest) (LVR 90%-95%) 4.64 4.71 4.39 4.46 0.25
Special Residential Home Loan (Principal and Interest) (LVR 90%-95%) 4.84 4.91 4.59 4.66 0.25

However, People’s Choice Credit Union cut fixed rates on selected loans by 5 to 10 basis points this week.

People’s Choice Credit Union Home Loan Rate New CR Old Rate Rate change
2 Year Fixed Package (Owner Occupied, Principal & Interest) 3.69 4.66 3.79 -0.10
Year Fixed Package (Investment, Principal & Interest) 3.84 5.20 3.94 -0.10
First Home Buyer 3 Year Fixed Package (Owner Occupied, Principal & Interest) 3.84 4.64 3.89 -0.05
First Home Buyer 3 Year Fixed Package (Owner Occupied, Interest Only) 4.34 5.16 4.39 -0.05
Home, Construction & Low Doc 2 Year Fixed (Owner Occupied, Principal & Interest)
3.84 5.17 3.94 -0.10

These changes wrap up a February where several lenders adjusted their interest rates up or down, including Suncorp, Bendigo Bank and Credit Union SA, St.George and AMP, Macquarie Bank and ME Bank.

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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 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.

How can I calculate interest on my home loan?

You can calculate the total interest you will pay over the life of your loan by using a mortgage calculator. The calculator will estimate your repayments based on the amount you want to borrow, the interest rate, the length of your loan, whether you are an owner-occupier or an investor and whether you plan to pay ‘principal and interest’ or ‘interest-only’.

If you are buying a new home, the calculator will also help you work out how much you’ll need to pay in stamp duty and other related costs.

What is a fixed home loan?

A fixed rate home loan is a loan where the interest rate is set for a certain amount of time, usually between one and 15 years. The advantage of a fixed rate is that you know exactly how much your repayments will be for the duration of the fixed term. There are some disadvantages to fixing that you need to be aware of. Some products won’t let you make extra repayments, or offer tools such as an offset account to help you reduce your interest, while others will charge a significant break fee if you decide to terminate the loan before the fixed period finishes.

Does the Home Loan Rate Promise apply to discounted interest rate offers, such as honeymoon rates?

No. Temporary discounts to home loan interest rates will expire after a limited time, so they aren’t valid for comparing home loans as part of the Home Loan Rate Promise.

However, if your home loan has been discounted from the lender’s standard rate on a permanent basis, you can check if we can find an even lower rate that could apply to you.

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.

What is the difference between fixed, variable and split rates?

Fixed rate

A fixed rate home loan is a loan where the interest rate is set for a certain amount of time, usually between one and 15 years. The advantage of a fixed rate is that you know exactly how much your repayments will be for the duration of the fixed term. There are some disadvantages to fixing that you need to be aware of. Some products won’t let you make extra repayments, or offer tools such as an offset account to help you reduce your interest, while others will charge a significant break fee if you decide to terminate the loan before the fixed period finishes.

Variable rate

A variable rate home loan is one where the interest rate can and will change over the course of your loan. The rate is determined by your lender, not the Reserve Bank of Australia, so while the cash rate might go down, your bank may decide not to follow suit, although they do broadly follow market conditions. One of the upsides of variable rates is that they are typically more flexible than their fixed rate counterparts which means that a lot of these products will let you make extra repayments and offer features such as offset accounts.

Split rates home loans

A split loan lets you fix a portion of your loan, and leave the remainder on a variable rate so you get a bet each way on fixed and variable rates. A split loan is a good option for someone who wants the peace of mind that regular repayments can provide but still wants to retain some of the additional features variable loans typically provide such as an offset account. Of course, with most things in life, split loans are still a trade-off. If the variable rate goes down, for example, the lower interest rates will only apply to the section that you didn’t fix.

How do you determine which home loan rates/products I’m shown?

When you check your home loan rate, you’ll supply some basic information about your current loan, including the amount owing on your mortgage and your current interest rate.

We’ll compare this information to the home loan options in the RateCity database and show you which home loan products you may be eligible to apply for.

 

What is a variable home loan?

A variable rate home loan is one where the interest rate can and will change over the course of your loan. The rate is determined by your lender, not the Reserve Bank of Australia, so while the cash rate might go down, your bank may decide not to follow suit, although they do broadly follow market conditions. One of the upsides of variable rates is that they are typically more flexible than their fixed rate counterparts which means that a lot of these products will let you make extra repayments and offer features such as offset accounts.

How can I apply for a first home buyers loan with Commonwealth Bank?

Getting a home loan requires planning and research. If you are considering a home loan with the Commonwealth Bank, you can find the information you need in the buying your first home section of the bank’s website.

You can see the steps you should take before applying for the loan and use the calculators to work out how much you can borrow, what your monthly repayments would be and the upfront costs you’d likely pay.

You can also book a time with a Commonwealth first home loan specialist by calling 13 2221.

CommBank publishes a property report that may help you understand the real estate market. The bank has also created a CommBank Property App that you can use to search for property.  The link to download this app is available on the same webpage.

If you are eligible for the First Home Loan Deposit Scheme, CommBank will help you process your application. The scheme helps first home buyers to purchase a home with a low deposit. You can read details about this scheme here and speak with a CommBank home lending specialist to understand your options.

How do I get a Suncorp home loan pre-approval?

Getting home loan pre-approval helps you work out a budget to help you search for a suitable property and make an offer with confidence. Once you put in an application, you should get your pre-approval outcome within two business days. To help get a fast turnaround time of your pre-approval application, ensure all the information and documentation that Suncorp requires. This includes proof of identification, recent payslips, bank account and credit card statements.

You can submit the home loan pre-approval application online. You’ll be asked for information about your income, expenses, assets, and debts. It should take you about 10 minutes to fill out the application, and you can do it free of charge. A Suncorp lending specialist will review your application and contact you within 24 hours or the next working day. Suncorp will not run a credit check until you have heard from this lending specialist.

Once you get Suncorp home loan pre-approval, it’s valid for 90 days. If you don’t find a property you wish to buy in this time you may be able to apply for an extension, speak to your Suncorp lending specialist about this.

Does the family tax benefit count as income?

The family tax benefits are one of several government support payments that are not considered taxable income. Other such payments include child care subsidies, economic support payments, rent assistance, and carer allowances. If you file a tax return, you typically don’t need to mention such income on the return. However, some home loan lenders may accept family tax benefits as an income source when reviewing your home loan application. You’ll still need to meet other lending requirements, such as having a sufficiently high credit score and enough savings for a deposit before the loan will be approved.

Aussies receiving family tax benefits usually have an adjusted taxable income of no more than $55,626 a year. Alternatively, one spouse can be receiving income support payments from the government to be eligible. Most importantly, they need to have children dependent on them for care at least 35 per cent of the time. Children between the ages of 16 and 19 should be either full-time secondary students or have a somewhat comparable study load unless the government exempts them from these study requirements. 

How long does Bankwest take to approve home loans?

Full approval for a home loan usually involves a property valuation, which, Bankwest suggests, can take “a week or two”. As a result, getting your home loan approved may take longer. However, you may get full approval within this time if you applied for and received conditional approval, sometimes called a pre-approval, from Bankwest before finalising the home you want to buy.  

Another way of speeding up approvals can be by completing, signing, and submitting your home loan application digitally. Essentially, you give the bank or your mortgage broker a copy of your home’s sale contract and then complete the rest of the steps online. Bankwest has claimed this cuts the approval time to less than four days, although this may only happen if your income and credit history can be verified easily, or if your home’s valuation doesn’t take time.

Can I get a NAB first home loan?

The First Home Loan Deposit Scheme of NAB helps first home buyers purchase a property sooner by reducing the upfront costs required. This scheme is offered based on a Government-backed initiative, with10,000 available places announced in October 2020.

Suppose your application for the NAB first home buyer loan is successful. In that case, you’ll only need to pay a low deposit, between 5 and 20 per cent of the property value and won’t be asked to pay lender's mortgage insurance (LMI). You’ll also receive a limited guarantee from the Australian government to purchase the property.

If you’re applying for the NAB first home buyer home loan as an individual, you need to have earned less than $125,000 in the last financial year. Couples applying for the NAB first home loan need to have earned less than $200,000 to be eligible. To be considered a couple, you need to be married or in a de facto relationship. A parent and child, siblings or friends are not considered a couple when applying for a NAB first home loan.

The NAB First Home Loan Deposit Scheme is currently offered only to purchase a brand new property, rather than an established property.