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ING joins big four banks in raising interest rates

ING joins big four banks in raising interest rates

ING have followed the big four banks in raising rates out of cycle, increasing some interest rates for investor variable loans by 15 basis points.

ING’s reference rates will increase 15 basis points across their Orange Advantage and Mortgage Simplifier products.

New and existing ING customers will be affected, with investor variable home loan rates increasing by 15 basis points.

These rate changes, which come into effect as of 25 September 2018, don’t impact new or existing owner occupier home loan rates.

The news comes shortly after Commonwealth Bank and ANZhiked home loan rates for their variable customers by 0.15 percentage points and 0.16 percentage points respectively.

Changes to existing investor rates

Product

Old Reference Rate

Change

New Reference Rate

Orange Advantage – Principal & Interest

5.42%

+0.15%

5.57%

Mortgage Simplifier – Principal & Interest

5.32%

+0.15%

5.47%

Orange Advantage – Interest Only

5.77%

+0.15%

5.92%

Mortgage Simplifier – Interest Only

5.67%

+0.15%

5.82%

Changes to investor fixed rates – new and existing

The comparison rates for new investor fixed loans have also increased in response to these reference rate increases.

Product

Old Interest Rate

Old Comparison Rate

Change

New Interest Rate

New Comparison Rate

1 Year Fixed Rate

4.32%

5.56%

4.32%

5.70%

2 Year Fixed Rate

4.37%

5.45%

4.37%

5.57%

3 Year Fixed Rate

4.55%

5.39%

4.55%

5.50%

4 Year Fixed Rate

4.69%

5.35%

4.69%

5.45%

5 Year Fixed Rate

4.90%

5.37%

4.90%

5.45%

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Fact Checked -

This article was reviewed by Personal Finance Editor Mark Bristow before it was published as part of RateCity's Fact Check process.

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Learn more about home loans

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.

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. 

When do mortgage payments start after settlement?

Generally speaking, your first mortgage payment falls due one month after the settlement date. However, this may vary based on your mortgage terms. You can check the exact date by contacting your lender.

Usually your settlement agent will meet the seller’s representatives to exchange documents at an agreed place and time. The balance purchase price is paid to the seller. The lender will register a mortgage against your title and give you the funds to purchase the new home.

Once the settlement process is complete, the lender allows you to draw down the loan. The loan amount is debited from your loan account. As soon as the settlement paperwork is sorted, you can collect the keys to your new home and work your way through the moving-in checklist.