This week, the Reserve Bank of Australia (RBA) announced that the cash rate would remain at a record-low 2.00% for the month of September.
We have already seen some lenders announce interest rate cuts to their suite of Home Loan products with mortgage holders reaping the benefits as the average owner-occupier interest rate currently rests at 4.69%^.
Kirsty Lamont of rate comparison website, Mozo has seen “over 50 interest rate changes in the past month.” The average owner-occupier interest rate is 55 basis points lower than it was this time last year while the average investor loan is also over 40 basis points lower^.
While we have seen most owner-occupier interest rates decrease, there has been an increase in some investment lending interest rates due to changes in lending policies that have been implemented by the Australian Prudential Regulation Authority (APRA).
APRA’s role is help protect the financial well-being of the Australian community by supervising and regulating banks and financial institutions to ensure that they act within certain guidelines.
After the RBA and Federal Government expressed concerns of a potentially overheated property market, especially in Melbourne and Sydney, APRA stepped in to limit growth in the investment lending channel. In order to do this, APRA placed a cap on investment lending. Some financial institutions already exceed this cap and are now under pressure to significantly reduce their investment lending. The 4 major banks are also required to increase the capital that they hold against mortgages which in turn can increase the cost of lending and interest rates in the investment sector.
The good news for owner-occupiers is the competition that this has created amongst financial institutions in the owner-occupier sector. “Lenders are wanting to bridge the gap left by the slower growth in investor lending and owner-occupiers will be the big winners,” Ms. Lamont said.
This brings increased opportunities to switch and save as six lenders offer cash back incentives from $1,000 to $2,000 for those looking at refinancing their current Home Loan. “We’re expecting this trend of lower rates and special offers to increase as the spring buying season ramps up through to the end of the year” said Ms. Lamont.
However, if you have a variable rate investment loan, or an ‘interest only’ variable rate home or investment loan, you may find that your lender increases the interest rate on that loan. If you are considering an investment property, you are likely to find the lending market more restricted than in the past. This doesn’t mean you won’t be able to find a loan that suits you. At Let’s Finance, we’re well aware that all situations vary and one size Home Loan product doesn’t always fit, that’s why we have access to a panel of over 30 lenders.
Getting the best suited Home Loan has never been easier, get in touch with your Home Loan Specialist today.
^Data sourced from Mozo. This is a general information guide only and does not take individual financial circumstances into account and therefore must not be relied upon. Please consult a Home Loan Specialist for advice specific to your financial situation.