Australia’s biggest lenders raked in an extra $2.5 billion by charging investors more for loans than owner occupiers. Banks are also continuing to hit both types of customers with higher interest rates if they fail to hunt for more competitive deals.
New analysis from the financial comparison website RateCity indicates that since the start of 2015, investors have been hit hard by two out-of-cycle rate hikes, while owner occupiers were hit only once by out-of-cycle rate hikes.
Consequentially, banks are charging investors more for loans. This has resulted in lenders earning amounts that exceed what they would have earned if they’d moved rates in line with the Reserve Bank of Australia’s falls.
Based on APRA home loan figures and banks’ interest rate changes, RateCity estimates that since the start of 2015, Westpac earned $750 million more, Commonwealth Bank earned $740 million more, National Australia Bank earned $570 million more, and Australia and New Zealand Banking Group earned $440 million more.
Peter Arnold, RateCity’s data and insights director, said borrowers need to be very savvy in order to nab good interest rate deals. “You will likely be paying a lot more on investment loans but there are some lenders who aren’t charging as much for investors,’’ he said. “If you have 20% equity on both types of loans you should be paying a rate under 4%.”
Mark Hewitt, general manager for sales and operations at Australian Finance Group, said interest rates in the investor loan market tended not to be as “price sensitive” because investment costs can be tax deductible.
Figures from RateCity show that on a 30-year home loan valued at $300,000, owner occupiers are being charged an average of 5.27% (investors are being charged an average of 5.51%). The difference in monthly repayments is $1660 for owner occupiers compared to $1705 for investors.
According to Jessica Darnbrough, head of corporate affairs at Mortgage Choice, despite investors being hit by higher rates across the market, deals remain “incredibly low.”
“Owner occupiers can now source loans as low as 3.78%,’’ she said. “Meanwhile many lenders are offering investment loans with interest rates as low as 3.9%”.
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