ANZ hikes interest only home loan rates, slashes principal and interest

ANZ has announced changes to its fixed home loan products, which saw interest-only loan rates rise by as much as 0.40%, while principal and interest rates were slashed by up to 0.50%, effective today.

ANZ was the final major bank to raise fixed interest rates on interest only mortgages, following moves from the Commonwealth Bank, NAB and Westpac.

Although CommBank and Westpac both left rates on principal and interest products for owner-occupiers unchanged, ANZ was the only lender so far to actually reduce rates for principal and interest borrowers.

Owner-occupier Breakfree fixed rate changes

“These changes are obviously a response to APRA’s recent restrictions around interest-only and investment lending,” Mozo Data Manager Peter Marshall said.

“It seems that ANZ is keen to slow down the rate of interest-only loan applications, and instead nudge customers toward making principal and interest repayments, which generally present less risk for the bank.”

APRA’s updated restrictions mean new interest-only lending must account for no more than 30% of a bank’s total mortgage lending, and also placed strict limits on the amount of interest-only loans with high LVRs being approved.

When APRA made the changes at the end of March, Chairman Wayne Byres said interest-only lending accounted for a massive 40% of all Australian home loans, and in his pre-budget address yesterday, Treasurer Scott Morrison reiterated that this was an area of risk that needed to be carefully monitored.

Interest-only fixed rate hikes are likely to hit investors hardest, but for Aussies looking to buy a family home, the recent changes from ANZ could actually be a blessing, with terms of 1, 2 and 3 years on their Breakfree product now below 4.00%.

“If you’re looking to lock in a fixed rate with a big bank, ANZ now offers some pretty competitive rates on principal and interest products,” Marshall said.

“But keep in mind that there are likely even more savings to be found by heading outside the major players and considering smaller lenders.”

Best fixed rates from the major banks

*For owner-occupiers making principal and interest repayments

Ready to lock in a rate on your home loan? Head over to our fixed rate mortgage comparison table to find some of the top rates around.