Mutuals lift IO rates by up to 50 bps

Effective 1 August, Firefighters Mutual Bank, Teachers Mutual Bank and UniBank are increasing interest rates on fixed (Solutions Plus) interest-only (IO) loan products by between 20 and 50 basis points. All rate changes apply to new business.

IO loans between $150,000 and $249,999 will grow by 0.30 per cent to 4.52 per cent p.a. for loans with loan-to-value ratios of 60 per cent or less; for loans with LVRs between 60 per cent and 80 per cent, the new rate will be 4.54 per cent p.a.

Loan values between $250,000 and $499,999 will see rate increases of 40 basis points. Clients making IO repayments on a loan with an LVR of less than or equal to 60 per cent will have a new rate of 4.49 per cent p.a., while those with an LVR of between 60 per cent and 80 per cent will have a new interest rate of 4.60 per cent p.a.

Clients with loans in the $500,000–$749,999 tier will see a rate increase of 50 basis points, to 4.57 per cent p.a. for LVRs of 60 per cent or less and 4.67 per cent p.a. for LVRs of 60 per cent to 80 per cent.

The same rate increase (0.50 per cent) also applies to customers with loans valued at $750,000 or more, with rates growing to 4.55 per cent p.a. for LVRs of 60 per cent or lower, and 4.65 per cent p.a. for LVRs of 60 per cent and 80 per cent p.a.

The Solutions Plus rate increase applies only to owner-occupier loans as the Solutions Plus loan is not available to investors. However, the IO rate increase on loans with a variable repayment structure applies to both owner-occupiers and investors, with an increase of 0.20 per cent p.a. to 5.66 per cent p.a.

Principal and interest repayments

At the same time, the mutual banks are cutting rates for new owner-occupier clients making principal and interest repayments on a Solutions Plus Home Loan between $250,000 and $499,999 where the LVR is 80-90 per cent. The new rate is 4.39 per cent p.a., reflecting a rate cut of 15 basis points.

[Related: Lender cuts IO rates by 20 bps]