Big Four Banks Increase Interest Rates
Over the past week, all four of the major banks in Australia have announced an increase on interest rates for variable home loans, independent of the RBA ( Reserve Bank of Australia). The RBA have kept the cash rate at a record low of 2% for three consecutive months but the banks are sighting their increases on a requirement to hold more capital to cover their mortgage loan books as the reason for the rise in interest rates.
Westpac were the first to increase interest rates by 20 basis points, followed by Commonwealth Bank who increased by 15 basis points, then NAB with 17 and ANZ with 18. These 4 major banks hold around 85% of all Australian mortgages which means that from November, when these new rates come into play, the majority of Australians will be paying an average of $350 a year in additional interest on variable home loans.
Smaller lenders interest rates
While the majors raised their interest rates, some of the smaller lenders have made themselves very attractive by reducing rates over the past few weeks. ME Bank reduced their interest rates by 40 basis points down to 3.89% and there are currently 10 other smaller lenders with rates under 4%. Switching to one of these smaller lenders could save some home owners almost $2000 in interest repayments in the first year alone.
If you are considering switching lenders, make sure you are aware of honeymoon rates, loan fees and all the terms and conditions of the loan. A Mortgage Broker can do a loan comparison for you to give you all your options. They can also let you know about any additional fees you may need to pay by switching lenders and explain all the terms and conditions.
Check out our online Mortgage Repayment Calculator to see how your repayments will change and how much you may be able to save with a cheaper lender.