Out-of-cycle rate hikes shake up the Australian home loan market

The cash rate may have been held for seven consecutive months, but this hasn’t prevented lenders from lifting mortgage rates independently of the Reserve Bank.

There have been 11 lenders including two of the big four banks announcing rate hikes this month, according to finder.com.au, Australia’s most visited comparison website.

A new analysis by finder.com.au reveals 11 lenders have declared rate rises for both variable and fixed home loans in March 2017.

Of the big four banks, ANZ, NAB and Westpac have announced rate changes this year.

While ANZ and NAB announced changes earlier this year, Westpac soon followed suit announcing rate changes just this month.

In March alone, NAB announced further changes with increases to its interest rates from 0.07 percent - 0.25 percent for variable rate home loans, while Westpac also raised its variable rates from 0.03 percent - 0.28 percent.

Despite increasing its variable rate, NAB implemented a new incentive for first home buyers by introducing its lowest home loan fixed rate of 2 years at 3.69 percent per annum.

Westpac is also providing a grace period until the 17th June by waiving the switching fee for interest-only home loans changing to principal and interest repayments. 

The average rate rise for owner-occupier loans in March 2017 across the big four that have adjusted rates (including NAB and Westpac) is 0.05 percent.

Taking this into account, a borrower with an average home loan of $357,200 with an average variable rate of 4.75 percent would need to pay an extra $11 per month if rates rose to 4.80 percent.

This amounts to $3,881 over 30 years.

Graham Cooke, Insights Manager at finder.com.au, says whether it’s to increase flexibility or boost profit margins, banks are under fire to manage stakeholder expectations while also dealing with the risk of an overheated property market.

For investor loans, more stringent regulations imposed by the Australian Prudential Regulation Authority (APRA) to curb investor lending may be prompting banks to up interest rates.

"Given recent rate increases, both owner occupiers and investors need to prepare for higher loan costs.

"It’s sensible to factor in 2-3 percent on top of your current mortgage repayments so you can cope with unexpected rate rises,” he says.

Variable home loan rate changes for March 2017

Fixed home loan rate changes for March 2017