Home News Sneaky rate hikes set to make banks half-a-billion-dollar richer

Sneaky rate hikes set to make banks half-a-billion-dollar richer

Font size :

Thanks to sneaky rate hikes on interest-only mortgages, banks stand to reap a half-a-billion-dollar-a-year windfall from a growing number of borrowers. Those who have interest-only loans are facing an ultimatum--either switch to principal-and-interest or face a rate hike of as much as 0.15 percentage points. An increase of just 0.1 percentage points adds $42 a month of $500 a year to repayments.

Data from the Reserve Bank shows that about one in four owner-occupied mortgages is interest-only, while two in three investor loans are interest-only. These numbers have been rising over time.

The National Australia Bank is the largest bank to lift interest-only rates, with its 0.1 per cent rise imposed last August expected to net about $85 million in extra interest annually from its $86 billion worth of interest-only mortgages.

According to a NAB spokesperson, this move was part of managing “the prevalence of interest-only lending in the Australian housing market. These differentiated rates mean our customers can choose a mortgage structure that best suits them.”

Another bank that ratcheted up its interest-only rates is Macquarie Bank. It hiked up its estimated $10 billion worth of loans by 0.15 percentage points last year, possibly earning an additional $15 million a year in interest.

Canstar, a financial products research firm, has a database showing that 14 lenders are riding the trend of charging interest-only customers a higher rate. The Australian Securities and Investments Commission found none was doing so at the end of 2014.

It can be confusing to know whether to get a variable rate or fixed rate mortgage, and what features are important. That's why it's important to not only check the right rates, but make sure that you're getting the right features in your home loan. Get help choosing the right home loan

Mortgage News and Articles

Borrowers should anticipate a possible rate hike Borrowers should anticipate a possible rate hike

Some experts advise borrowers to look for a fixed loan that allows extra repayments so that they can whittle down the balance sooner Read more

Why choosing the right mortgage is hard for first-home buyers Why choosing the right mortgage is hard for first-home buyers Many feel overwhelmed by the sheer range of products and interest rates on offer, a new survey reveals ... Read more

Mortgage applications drop in second quarter Mortgage applications drop in second quarter This marks the “beginning” of a downward trend, says Equifax executive ... Read more

To break monopoly, many smaller lenders could become banks To break monopoly, many smaller lenders could become banks The proposed change could break the Big Four’s monopoly over the mortgage market and help families get cheaper home loan rates ... Read more

More mortgage news and articles

Sponsored Links

Tuesday, Jul 25, 2017
Top Featured Rates
Top Bank Rates

Get help choosing the right home loan

Whether you're a first homebuyer, looking to refinance, or investing, it's important to have the right loan for your needs. Just fill in a few details below and one of our trusted mortgage advisers will contact you.

A quick & easy way to find the right home loan
  • Purpose of mortgage
  • Household Income
    $
  • How much do you want to borrow?
    $
  • How much deposit do you have?
    $
  • How much is your house worth?
    $
  • How much do you still owe on your mortgage?
    $
  • What type of mortgage do you have?


  • How much is your new home?
    $
  • How much do you want to borrow?
    $
  • How soon do you want a mortgage?
Next
  • First name
  • Last name
  • Where do you live?
  • Phone number

Special Offers

Related Keywords