Investors get cold feet as banks put the squeeze on interest



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ABS data released yesterday shows the housing market has taken an icy dip – but its only investors who have cold feet.

September ABS figures showed that the investment housing commitments fell by a whopping 8.5 percent (seasonally adjusted) or $1.24 billion, from the previous month.

The drop in investor borrowing is largely, if not solely, but to the introduction of different interest rates for investors and owner-occupiers, a practice which has been taken up by half the market already.

RateCity money editor Sally Tindall said today’s ABS results all but confirm that the two-tiered pricing structure is here to stay.

“The banks introduced different interest rates for investors and owner occupiers after the government regulator told them to do what they could to limit investor growth.

“The regulator will be over the moon with these new ABS figures as it shows that the action the banks have taken is working,” she said.

RateCity data shows that the average gap between rates is about 0.36 percent, and can be as high as 1.44 percentage points. While the rate hikes aren’t great news for investors, it does open a few new doors for owner-occupiers, with a number of lenders dropping their rates for these buyers.

The difference between 4 per cent and 5.4 per cent on a $300,000 home loan is $253 in monthly repayments or $3,036 a year – a savings that many Australians won’t sneeze at.

“For the last decade, investors and owner-occupiers have had the same deal on interest rates.  Now suddenly, owning and living in your own home can work in your favour,” Tindall said.

“While it might not compensate for the competitiveness in some property markets, it is a step in the right direction for families who just want to own the roof they sleep under.”

Of course, many mortgage holders – regardless of whether they are an investor or not – are about to get hit with higher rates if they have a mortgage with one of the big four banks.

All four major banks will raise their rates this month, with NAB to go first this week.  CBA, Westpac and ANZ will all follow suit, adding an extra 0.15 to 0.20 per cent on to all their variable rates.

“Unfortunately owner-occupiers won’t see a reprieve from this particular rate hike – unless of course they compare the competition and walk down the road to a better deal,” she said.

Investor Margin Changes (since June 1)

Lender

New Margin

Old Margin

Margin Change

QT Mutual Bank

1.44

0

1.44

Beyond Bank

1.2

0

1.2

ING DIRECT

0.85

0

0.85

UBank

0.72

0

0.72

Big Sky Building Society

0.67

0

0.67

Macquarie Bank

0.57

0

0.57

Aussie

0.55

0

0.55

MyState

0.52

0

0.52

ME Bank

0.51

0

0.51

AMP Bank

0.47

0

0.47

Real Home Loans

0.47

0

0.47

ADCU

0.06

-0.4

0.46

Heritage Bank

0.41

0

0.41

Adelaide Bank

0.4

0

0.4

Based on lowest standard variable rates, excludes package, intro and basic loans

 

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