Tuesday 19th February 2019
The first month of 2019 saw interest rate hikes in Australia that could affect home loans.
Make sure you understand your options for dealing with these changes.
What follows is a look at the latest news and what it could mean for you.
National Australia Bank (NAB) announced that it will raise its interest rates 12 to 16 basis points starting January 31, 2019. This announcement came after the other three of the country’s four big banks – Commonwealth Bank (CBA), Australia and New Zealand Banking Group (ANZ) and Westpac – hiked their rates in September 2018.
NAB had indicated back then that it wouldn’t raise rates in order to help its loyal customers, but this month said it had held off lifting rates as long as possible.
Mike Baird, NAB’s chief customer officer of consumer banking, said that the increase was due to an increase in the cost of funding of around 15 basis points.
How does it affect you?
The Sydney Herald outlines a helpful example for homeowners: If you have a home loan of $300,000 over a 30-year term, you’ll pay around $22 more per month if the rate is raised 12 basis points.
Residential investors with interest-only loans will pay about $40 more per month.
NAB tried to limit the increases for principal-and-interest owner-occupier loans, at 12 basis points to 5.36 per cent. Interest-only loans for owner-occupiers were raised 16 basis points, to 5.93 per cent.
Investor loans were raised 16 basis points across the board, meaning principal-and-interest rates are now 5.96 per cent and interest-only are 6.41 per cent.
What you can do
First, you might want to consider a fixed-term mortgage to ensure that an unstable economy won’t affect you (as much). While you can usually ‘fix loans’ for one to five years, remember that there’s some fine print for doing so.
For instance, you may not be able to make extra repayments to pay your balance off quicker, since you agreed to a fixed term. The reasoning is that banks want to also fix the profit they’ll receive from the planned interest payments.
Also remember that mortgage brokers can help you refinance your mortgage and find a better payment plan that works for your specific situation.
To find out more about your home loan options and how interest rate changes could affect you, get in touch with our team today.