AMP joins latest round of home loan rate rises

AMP has today hiked home loan interest rates for both owner-occupiers and investors, joining a rising trend of lenders lifting borrowing rates in response to funding pressures.

AMP Bank Group Executive Sally Bruce echoed the sentiments of lenders which have already upped their rates, including ME and Bank of Queensland, saying the changes were driven by the increased cost of funding.

“We are managing our portfolio in a very active market and our decisions on rates are never taken lightly,” she said.

“We have held off passing this cost on to customers for as long as we can and in fact have not increased interest rates for existing customers since June last year.”

The RBA official cash rate, which in theory sets the pace for interest rates offered by banking institutions, has been on hold at a rock bottom 1.50% since August 2016. Despite this, recent Mozo research found that nearly half of Aussie borrowers have been hit with an out-of-cycle rate rise since the last RBA rate change - which was a cut.

• 0.08% for owner-occupier, principal and interest loans
• 0.17% for owner-occupier, interest only loans
• 0.17% for investment, principal and interest loans
• 0.17% for investment, interest only loans

AMP joined lenders Aussie, Macquarie, BOQ and Heritage Bank in lifting rates this month, in a trend that Mozo Data Manager Peter Marshall said will likely sweep the entire home loan market.

“The cost of securing funding is one thing that affects home loan lenders more or less across the market, so I’d expect to see rates rise across the board in the near future,” he said.

“That includes the big banks - they aren’t going to sit on their hands while everyone else moves to manage these added costs. So all borrowers should prepare for rising rates, whether that means locking in a fixed interest rate, tightening your budget to account for higher repayments or, if you can, refinancing to a new loan offer.”

What to do if your home loan lender has hiked rates

If your home loan repayments have risen lately, then there are a few things you can do to minimise the damage done to your bottom line.

• Call your lender. First things first, give your home loan lender a call and see if you can haggle your way to a better deal. Even if you only manage to keep your original home loan rate, that’s better than having it go up, right?
  
• Ask about locking in a fixed rate. If your variable rate home loan has gone up, check out the fixed rates on offer. You might find a better deal that you can usually lock in for anywhere between 1 and 7 years. Just keep in mind that when your fixed term ends, market rates might have risen, and at that point, you may wind up making higher repayments.
  
• Consider refinancing. Another option is to change lenders all together, by refinancing to a different home loan deal. You can compare your home loan options and think about switching if there’s better value to be found. Just keep in mind, with lenders tightening borrowing criteria and property values plateauing, this could be trickier than you expect.
  
• Streamline your budget. If all else fails, you may just need to tighten your budgetary belt if your home loan repayments go up. One way to do this is to make smaller lifestyle changes - like bringing lunch to work instead of buying, or eating out less often - but another way is to make sure all your financial products are delivering the best possible value. For example, did you know that the average Aussie credit cardholder blows $713 in interest charges each year? Paying off that debt could have a bigger effect on your savings than swearing off your daily coffer would!

Want to know if there’s a better home loan deal out there for you? Check out our home loan Switch and Save calculator to find other options.