Lenders announce out-of-cycle rate changes

As of this week (11 February), Macquarie Bank has announced that it is introducing changes to interest rates on both principal and interest (P&I) and interest-only (IO) loans.

Macquarie Bank has increased owner-occupier variable rates with P&I repayments by 0.06 per cent and IO repayments by 0.16 per cent across all LVR bands.

This will mean that the owner-occupier rate for new P&I loans at ≤70 per cent LVR will now be 3.81 per cent and the owner-occupier rate for new IO loans at ≤70 per cent LVR will be 4.40 per cent.

Further, the lender has announced a 0.16 per cent rate increase for investment variable rate loans with both P&I and IO repayments across all LVR bands.

The investment rate for new P&I loans at ≤70 per cent LVR will now be 4.10 per cent and the investment rate for new IO loans at ≤70 per cent LVR will be 4.55 per cent.

According to Canstar, the changes could see owner-occupiers on a P&I loan pay $14 to the monthly loan repayments, amounting to an extra $4,928 in interest over the life of a $400,000 loan over 30 years.

Canstar’s group executive of financial services, Steve Mickenbecker, noted the changes, stating: “Macquarie has joined the 12 other lenders that have increased variable home loan rates since the start of 2019. At the same time 18 lenders have reduced interest rates on one or more of their variable rate loans.

“As with other lenders, Macquarie will have been feeling the margin pressure of increased wholesale funding costs.  

“The increase is 6 basis points for principal and interest owner occupied loans. Surprisingly, given APRA’s relaxation of the caps on interest-only lending and investment lending, a further 10 basis points is being tacked on to these loans,” he said.

Further, Sally Tindall, research director of RateCity.com.au, also commented, saying: “This moderate rate rise for owner-occupiers suggests Macquarie Bank is trying to remain competitive while balancing their funding pressures.”

“Macquarie Bank’s variable interest rate rise is significantly lower than the other rate hikes we’ve seen from some banks this year for existing customers, the highest of which was 20 basis points for owner-occupiers,” Ms Tindall said.

Fixed rate changes

Macquarie Bank has also announced that its four-year and five-year fixed rates for all new owner-occupier and investment loans will decrease by between 0.10 per cent and 0.40 per cent.

Along with Macquarie, Westpac and its subsidiaries, including St. George, Bank of Melbourne and BankSA, have also all changed rates on new fixed rate home loan products.

The interest rate hikes are applicable to all new and existing home lending customers, including investors and owner-occupiers.

As of Monday (11 February), Westpac has decreased its two-year fixed home loan rates (P&I) under the Premier Advantage Package by 0.10 per cent (from 3.89 per cent to 3.79 per cent), while the five-year P&I fixed rate has increased by 10 basis points from 4.09 per cent to 4.19 per cent.

St. George Bank has also changed its two-year and five-year rates.

Its owner-occupier standard two-year fixed rates (P&I) declined by 0.06 per cent from 3.90 per cent to 3.84 per cent (5.24 per cent comparison), while its residential investment standard fixed rate (P&I) dropped by 10 basis points to 4.04 per cent (5.72 per cent comparison).

Meanwhile, its five-year fixed rates increased. St.George’s new residential investment standard five-year fixed rates (IO) increased by 0.10 per cent from 5.05 per cent to 5.14 per cent (6.05 per cent comparison).

Portfolio loans with a five-year fixed rate also increased 0.10 per cent from 5.04 per cent to 5.14 per cent.

Bank of Melbourne

Like its sister banks, Bank of Melbourne also reduced two-year fixed rate home loans rates.

Bank of Melbourne has decreased the two-year owner-occupier P&I loan by 0.11 per cent, meaning that the rate now starts from 3.79 per cent for loans with an LVR under 60 per cent (comparison rate 5.14 per cent), rising to a maximum of 3.89 per cent for those with LVRs over 80 per cent (comparison rate of 5.23 per cent).

Residential investment standard fixed rates (P&I) over two years decreased by 5 basis points across all LVR loans, meaning the rates now range from between 3.99 per cent (5.63 per cent comparison) and 4.09 per cent (5.73 per cent comparison).

Residential investment standard fixed rates (IO) for five-year terms increased by 0.10 per cent across all LVR, with mortgages with LVRs under 60 per cent starting from 5.04 per cent (5.95 per cent comparison) and from 5.09 per cent (6.00 per cent comparison) for loans with LVRs between 50 and 80 per cent.

Portfolio loans with fixed rates over five years increased by 0.10 per cent, from 5.04 per cent to 5.14 per cent, with a 4.99 per cent new comparison rate.

BankSA

Lastly, BankSA also reduced its two-year and increased its five-year fixed home loan interest rates.

Bank SA decreased two-year fixed owner-occupier rates (P&I) by 0.11 per cent, from 4.00 per cent to 3.89 per cent, with a new comparison rate of 5.24 per cent.

Its two-year residential investment standard fixed rates (P&I) decreased by 0.05 per cent, from 4.14 per cent to 4.09 per cent, with a 5.73 per cent new comparison rate.

Five-year residential investment standard fixed rates (IO) increased by 0.10 per cent p.a, from 5.04 per cent to 5.14 per cent, with a new comparison rate of 6.05 per cent. The new Advantage Package Rate is 4.99 per cent with a comparison rate of 5.92 per cent p.a.

Portfolio loan with a fixed rate for five years increased by 0.10 per cent p.a. (from 5.04 per cent to 5.14 per cent) with a new comparison rate of 4.99 per cent.

Out-of-cycle interest changes

Throughout 2018, several lenders, including ANZ, the Commonwealth Bank of Australia, and Westpac, increased rates out of cycle.

Despite monetary policy inaction from the Reserve Bank of Australia, which has held the official cash rate at 1.5 per cent, lenders have attributed their decisions to lift rates to a sustained rise in wholesale funding costs.  

Canstar’s group executive of financial services, Steve Mickenbecker, said: “The RBA has revised its growth projection down and is no longer discounting a cash rate reduction as the next move.

“However, with the number of out-of-cycle increases over recent months, there is the risk that any cash rate reduction might only be partially passed on to borrowers, while signalling a 25-basis point reduction in savings and term deposit rates,” he said.

[Related: Westpac announces further rate hikes]

Ezekiel MacNevin

Ezekiel is a journalist on the mortgages, property investment and wellness titles at Momentum Media. 

Before joining the team in 2019, he was a freelance journalist for Vice Australia, Pulse Radio and the Sydney-based travel publication Global Hobo, among others. 

Ezekiel studies a double Bachelor of Communications and International Studies at the University of Technology, Sydney.

You can email Ezekiel on: This email address is being protected from spambots. You need JavaScript enabled to view it.