The big four bank last week announced changes to interest rates across a range of variable lending products for home owners and investors.
Under the changes, the following increases will apply from next Friday (24 March):
- The variable home loan rate for owner-occupiers will increase by 0.03 per cent to 5.32 per cent per annum for customers with principal and interest repayments;
- The variable home loan rate for owner-occupiers will increase by 0.08 per cent to 5.49 per cent per annum for customers with interest only repayments;
- The variable residential investment property loan rate will increase by 0.23 per cent to 5.79 per cent per annum for customers with principal and interest repayments; and
- The variable residential investment property loan rate will increase by 0.28 per cent to 5.96 per cent per annum for customers with interest only repayments.
Variable lending products for small businesses will also increase by 0.08 per cent from 3 April.
George Frazis, the chief executive of Westpac Consumer Bank, said last week’s decision takes into account a “number of economic and regulatory factors”.
“[Last week]’s changes are in response to increasing funding costs. Despite home loan interest rates being at historically low levels, both deposits and wholesale funding of mortgages have increased over the last nine months,” he said.
“We understand the significance of interest rate changes to our home loan customers, so we take a very careful approach to these decisions.
“We try to balance the needs of both owner-occupiers and investors in making these decisions while continuing to provide customers with a competitive offering across our range of products.”
He added: “Importantly, we are offering lower interest rates to customers who make principal payments to encourage customers to pay down their home loan in this low interest rate environment.”
Customers with interest only home loans who wish to move to principal and interest repayments can reportedly do so without paying a switching fee until 17 June 2017.
NAB changes home loan interest rates
The Westpac announcement comes just a day after NAB announced a range of changes to its home loan interest rates, including a new special fixed rate for first home buyers and increases to interest rates for new and existing owner-occupier and residential investor borrowers.
First home buyers
NAB is now offering first home buyers a 3.69 per cent per annum fixed rate for two years, for owner-occupier, principal and interest loans.
This compares to NAB’s current advertised two-year package fixed rate for home loans rate of 3.98 per cent per annum.
According to the bank, the changes will save eligible customers around $50 a month in repayments over the two-year fixed period (based on a $300,000 loan).
NAB’s variable rate for home loans (standard variable rate) for owner-occupier customers will increase by 0.07 per cent to 5.32 per cent per annum, from next Friday (24 March).
This change will see NAB customers with a standard variable rate home loan pay an extra $13 each month on their home loan principal and interest repayments (based on a $300,000 loan over a 30-year term).
Residential investor borrowers
Also from next Friday, NAB’s variable rate for residential investment home loans will increase by 0.25 per cent to 5.80 per cent per annum.
Decisions on interest rates are 'difficult ones'
Speaking of the changes, NAB chief operating officer Antony Cahill said: “The decisions we make on interest rates are difficult ones, and we want to assure our customers we do not take them lightly as we seek to achieve the right balance for all our stakeholders while considering the dynamic financial and economic environment in which we operate.
“The difference between what we charge and how much it costs us to fund a mortgage remains under pressure, with intense competition, increasing regulation, and elevated funding costs.
“By making a series of changes, both up and down, we are seeking to balance these across our entire mortgage portfolio.”
Mr Cahill added: “We understand these changes will affect customers in different ways, and we always encourage customers to have a conversation with their banker or broker about what home loan suits them best.”
Touching on the changes to first home buyers, Mr Cahill said the new rate was the "lowest home loan rate ever offered by NAB" and will "help Australians entering the property market for the first time to achieve their home ownership dreams.”
He added that the bank was also helping first home buyers to secure a home loan by "recognising rental history as a form of genuine savings in home loan applications".