Article by Patrick Lynch, Head of Operations at Long Property
We’ve recently seen 3 (Westpac, ANZ and CBA) of the Big 4 Major Banks raise their mortgage interest rates, despite the Reserve Bank (RBA) not moving on official rates for about 2 years. In fact, most commentators – including those of the Big 4 Banks themselves – do not expect any increases from the RBA until late 2019, given low inflation and the softening of the economy, including housing markets in Melbourne and Sydney.
So why have they acted now?
All have blamed the move on a sustained increase in wholesale funding costs, which they claim to have absorbed for several months rather than passing onto customers.
Other Lenders took similar rate steps recently, which largely went under the radar, for the same reason. The Big Banks had been reluctant to act earlier, perhaps aware of the already poor view the public have of Banks following revelations from the Royal Commission.
These moves can be seen as protecting Bank profitability, which benefit shareholders.
Westpac were first to act, increasing by 0.14% (effective 19 September). CBA 0.15% (4 October) and ANZ 0.16% (27 September) have followed suit, and we wouldn’t be surprised if NAB are shortly behind.
Figures quoted in the media suggest customers with a $400,000 loan could pay up to an extra $40 per month.
Even though we have seen a tightening in policy and assessment, there are opportunities for customers to review their lending arrangements.
Customers on interest only can potentially benefit from lower rates if they can afford the higher principal and interest repayments. There are also second-tier Banks and Lenders offering lower variable rates than the Big 4, especially if you have significant equity in an existing property, plus strong income and limited other debts (e.g. personal loans, credit cards, etc.).
In addition, it might be worth considering fixing some or all of your mortgage debt, to avoid any future rises.
We don’t have the crystal ball, but we welcome enquiries to see whether we can assist with your financial strategy and structure, including interest rates.
