Two of Australia’s biggest banks have changed their mortgage rates

Two of Australia’s biggest banks have changed their mortgage rates

Considering a home loan with Macquarie Bank or ING? It may have just gotten cheaper.

Both banks have made changes to a wide variety of their mortgage rates, with Macquarie lowering rates by up to 60 basis points and ING by up to 40 basis points (see tables below).

ING has also increased a few of its home loan interest rates, by up to 11 points.

These interest rate changes apply to selected mortgage offers across:

  • Owner-occupied and investment loans
  • Principal-and-interest and interest-only loans

Looking at just two of the changes, here’s how they could affect the mortgage repayments on a 30-year, $400,000 loan:

Macquarie Bank ING
Product Basic Flyer Investment Loan Fixed (principal & interest, LVR 70-80%) 5 years Mortgage Simplifier Investment Loan (principal & interest, $150k+, LVR < 80%)
Old rate 4.74% 4.44%
New rate 4.14% 4.04%
Old repayments $750,304 $724,502
New repayments $699,151 $690,803
Difference $51,153 $33,699

Macquarie and ING v the market

So, how do Macquarie Bank and ING compare to other lenders in terms of interest rates?

Macquarie’s loan is priced at 4.14 per cent, while the average rate for all the five-year investment loans on RateCity is 4.82 per cent (as of 31 March 2019).

ING’s loan is priced at 4.04 per cent, while the average for all the variable principal-and-interest loans on RateCity is 4.72 per cent.

That said, it’s important to note that the cheapest mortgage isn’t always the best mortgage. Other factors to consider when weighing up a home loan include:

  • Loan fees (upfront fees, ongoing fees)
  • Loan features (such as offset account, redraw facility, additional repayments)
  • Lender customer service (branch access, call centre, online banking options)

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Macquarie Bank selected changes

Product Old advertised rate New advertised rate New comparison rate Change in advertised rate
Basic Flyer Home Loan Fixed 1 year (principal & interest, LVR 70-80%) 4.04% 3.94% 3.91% -10 points
Basic Flyer Home Loan Fixed 2 years (principal & interest, LVR 70-80%) 4.04% 3.84% 3.90% -20 points
Basic Flyer Home Loan Fixed 3 years (principal & interest, LVR 70-80%) 4.04% 3.84% 3.89% -20 points
Basic Flyer Home Loan Fixed 4 years (principal & interest, LVR 70-80%) 4.34% 3.94% 3.92% -40 points
Basic Flyer Home Loan Fixed 5 years (principal & interest, LVR 70-80%) 4.34% 3.94% 3.92% -40 points
Basic Flyer Investment Loan Fixed 2 years (principal & interest, LVR 70-80%) 4.34% 4.04% 4.33% -30 points
Basic Flyer Investment Loan Fixed 3 years (principal & interest, LVR 70-80%) 4.34% 4.04% 4.30% -30 points
Basic Flyer Investment Loan Fixed 4 years (principal & interest, LVR 70-80%) 4.64% 4.14% 4.31% -50 points
Basic Flyer Investment Loan Fixed 5 years (principal & interest, LVR 70-80%) 4.74% 4.14% 4.29% -60 points

ING selected changes

Product Old advertised rate New advertised rate New comparison rate Change in advertised rate
Orange Advantage Home Loan (principal & interest, $500k-$1m, LVR < 80%) 3.93% 3.85% 4.17% -8 points
Orange Advantage Home Loan (principal & interest, $1m+, LVR < 80%) 3.89% 3.81% 4.13% -8 points
Orange Advantage Home Loan (interest-only, ($150k-$500k, LVR < 80%) 4.33% 4.44% 4.75% +11 points
Orange Advantage Investment Loan (principal & interest, $150k+, LVR < 80%) 4.39% 4.09% 4.41% -30 points
Orange Advantage Investment Loan (interest-only, $150k+, LVR < 80%) 4.69% 4.49% 4.80% -20 points
Mortgage Simplifier Home Loan (principal & interest, $150k-$1m, LVR < 80%) 3.88% 3.80% 3.82% -8 points
Mortgage Simplifier Home Loan (interest-only, $150k-$500k, LVR < 80%) 4.28% 4.39% 4.41% +11 points
Mortgage Simplifier Investment Loan (principal & interest, $150k+, LVR < 80%) 4.44% 4.04% 4.06% -40 points
Mortgage Simplifier Investment Loan (interest-only, $150k+) 4.59% 4.44% 4.46% -15 points
Fixed Rate Investment Loan 3 years 4.19% 4.09% 5.48% -10 points
Fixed Rate Investment Loan 4 years 4.69% 4.59% 5.51% -10 points
Fixed Rate Investment Loan 5 years 4.69% 4.59% 5.41% -10 points

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Learn more about home loans

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.

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.

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 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 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 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.

Who has the best home loan?

Determining who has the ‘best’ home loan really does depend on your own personal circumstances and requirements. It may be tempting to judge a loan merely on the interest rate but there can be added value in the extras on offer, such as offset and redraw facilities, that aren’t available with all low rate loans.

To determine which loan is the best for you, think about whether you would prefer the consistency of a fixed loan or the flexibility and potential benefits of a variable loan. Then determine which features will be necessary throughout the life of your loan. Thirdly, consider how much you are willing to pay in fees for the loan you want. Once you find the perfect combination of these three elements you are on your way to determining the best loan for you. 

Mortgage Calculator, Loan Purpose

This is what you will use the loan for – i.e. investment. 

What is the best interest rate for a mortgage?

The fastest way to find out what the lowest interest rates on the market are is to use a comparison website.

While a low interest rate is highly preferable, it is not the only factor that will determine whether a particular loan is right for you.

Loans with low interest rates can often include hidden catches, such as high fees or a period of low rates which jumps up after the introductory period has ended.

To work out the best value for money, have a look at a loan’s comparison rate and read the fine print to get across all the fees and charges that you could be theoretically charged over the life of the loan.

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.

Interest Rate

Your current home loan interest rate. To accurately calculate how much you could save, an accurate interest figure is required. If you are not certain, check your bank statement or log into your mortgage account.

How do I calculate monthly mortgage repayments?

Work out your mortgage repayments using a home loan calculator that takes into account your deposit size, property value and interest rate. This is divided by the loan term you choose (for example, there are 360 months in a 30-year mortgage) to determine the monthly repayments over this time frame.

Over the course of your loan, your monthly repayment amount will be affected by changes to your interest rate, plus any circumstances where you opt to pay interest-only for a period of time, instead of principal and interest.

Does Australia have no cost refinancing?

No Cost Refinancing is an option available in the US where the lender or broker covers your switching costs, such as appraisal fees and settlement costs. Unfortunately, no cost refinancing isn’t available in Australia.

Can I change jobs while I am applying for a home loan?

Whether you’re a new borrower or you’re refinancing your home loan, many lenders require you to be in a permanent job with the same employer for at least 6 months before applying for a home loan. Different lenders have different requirements. 

If your work situation changes for any reason while you’re applying for a mortgage, this could reduce your chances of successfully completing the process. Contacting the lender as soon as you know your employment situation is changing may allow you to work something out.