Bankwest, a subsidiary of Commonwealth Bank of Australia (CBA), has launched a 76-basis-point interest rate rise for principal-and-interest homebuyers, the latest move in the lender’s attempts to slow borrowing and lower the risk of bad debts on its loan books.
The Perth-based bank is creating a new category of low deposit loans for those with less than 5% deposit by raising rates to 5.29%, up from 4.53%. The new rate is inclusive of lenders’ mortgage insurance (LMI). The comparative rate, which takes into account all fees and charges, will increase from 4.94% to 5.69%.
For a homebuyer with a 30-year, principal-and-interest $950,000 loan, the new rate of 5.29% will mean an increase in monthly payments of $439 to $5,269.
“The bank takes a balanced approach to product and pricing changes, and we are mindful of our broader obligations as a responsible lender. [We review] products and pricing on an ongoing basis with the aim of balancing the needs of our customers, shareholders,” a spokesperson told The Australian Financial Review.
The higher rates apply to higher loan-to-value owner-occupied, principal-and-interest borrowers, who until now have largely avoided big increases, as lenders have focused their efforts on containing interest-only borrowers.
Lenders such as Westpac and Australia and New Zealand Banking Group (ANZ) are lowering rates for owner-occupier principal-and-interest borrowers. They’re also providing incentives for those switching from interest-only, such as waiving new loan fees.
The Reserve Bank and Australia’s prudential regulators are publicly pressuring lenders to tighten restrictions to borrowers because of concerns that cheap loans are fuelling price growth in Sydney and Melbourne’s property markets. With more borrowers taking on cheap loans to enter the property market, regulators fear that high levels of debt could affect the broader economy.
However, the bank rhetoric and lending caps have largely targeted interest-only loans.
Bankwest is the second lender in a week to ramp up restrictions on borrowers with small deposits.
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