Rates are on the rise, but not because The Reserve Bank has increased the cash rate which has been at a low of 1.5% since last August.
Some owner occupier loan rates have increased a little, but it is the investor who is really being targeted. At first the rates were increased by small amounts around 0.10% to 0.15% but the latest increases have been more like 0.22% to 0.25%.
The banks are claiming the cost of borrowing new funds has gone up to them, but then one would assume the increases would only apply to new loans. In fact, it seems that the new loans have the best rates and the loans already settled are the loans that are targeted with hefty increases.
The banks don’t look after their existing customers!
We need to realize that their job is to increase profits, so they ratchet up the rates of their existing customers’ loans over time and make a wind fall profit.
So what is happening. The Reserve Bank is leaving rates on hold, fearing a further drop in interest rates will further stimulate the Sydney and Melbourne markets. ASIC, the Australian Securities and Investments Commission, along with APRA, The Australian Prudential Regulatory Authority, are forcing lenders to limit investor lending. This applies Australia wide and not just to the inflated markets of Sydney and Melbourne, Investors are targeted. At the end of 2014 lenders were instructed to limit the dollar increase of investor loans to a maximum of 10% over their previous year’s investor loans. Some lenders stopped lending to investors for a time as they had already grown more than 10%. Others raised interest rates to limit the loans they would attract and approve.
These measures have failed to curb investor interest in property, so APRA recently introduced a further restriction on lenders, limiting the total dollar value of interest-only loans to 30% of total new residential mortgages.
Now different rates are offered for different loan types.
There are different prices for Owner Occupied interest only, owner occupied principle and interest, investor interest only and investor principle and interest as well as rates based on loan amount and LVR (loan to value ratio).
It can be quite confusing to have so many different criteria determining what interest rate will be offered to a customer. For this reason, everyone who has one or more mortgages should develop a good working relationship with a finance broker who can navigate this maze and make sure the best outcome is secured initially, and that ongoing scrutiny of rate changes ensures your interests are being protected over your borrowing life.
To have your current borrowing assessed and options outlined please call Sandra Dignam from Every Loan on 9653 2034.