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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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 '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. 

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.

What do people do with a Macquarie Bank reverse?

There are a number of ways people use a Macquarie Bank reverse mortgage. Below are some reasons borrowers tend to release their home’s equity via a reverse mortgage:

  • To top up superannuation or pension income to pay for monthly bills;
  • To consolidate and repay high-interest debt like credit cards or personal loans;
  • To fund renovations, repairs or upgrades to their home
  • To help your children or grandkids through financial difficulties. 

While there are no limitations on how you can use a Macquarie reverse mortgage loan, a reverse mortgage is not right for all borrowers. Reverse mortgages compound the interest, which means you end up paying interest on your interest. They can also affect your entitlement to things like the pension It’s important to think carefully, read up and speak with your family before you apply for a reverse mortgage.

What are the features of home loans for expats from Westpac?

If you’re an Australian citizen living and working abroad, you can borrow to buy a property in Australia. With a Westpac non-resident home loan, you can borrow up to 80 per cent of the property value to purchase a property whilst living overseas. The minimum loan amount for these loans is $25,000, with a maximum loan term of 30 years.

The interest rates and other fees for Westpac non-resident home loans are the same as regular home loans offered to borrowers living in Australia. You’ll have to submit proof of income, six-month bank statements, an employment letter, and your last two payslips. You may also be required to submit a copy of your passport and visa that shows you’re allowed to live and work abroad.

Cash or mortgage – which is more suitable to buy an investment property?

Deciding whether to buy an investment property with cash or a mortgage is a matter or personal choice and will often depend on your financial situation. Using cash may seem logical if you have the money in reserve and it can allow you to later use the equity in your home. However, there may be other factors to think about, such as whether there are other debts to pay down and whether it will tie up all of your spare cash. Again, it’s a personal choice and may be worth seeking personal advice.

A mortgage is a popular option for people who don’t have enough cash in the bank to pay for an investment property. Sometimes when you take out a mortgage you can offset your loan interest against the rental income you may earn. The rental income can also help to pay down the loan.