ING Direct latest bank to slug interest only borrowers with variable rate rises
Following moves by other banks ING Direct has announced it will raise the variable rates on several of its interest only home loans, in a move expected to affect not only investors but also owner occupiers.
The non major bank said it will apply the biggest rate hikes to Orange Advantage and Mortgage Simplifier interest only mortgages, increasing the cost of mortgage repayments for investors by 35 basis points to 5.77% and 5.67% respectively. Owner occupiers will see their rates go up by 20bp.
ING Direct’s rate adjusting does not come as a surprise. Here at Mozo, we’ve reported that all four big banks have moved interest only rates (with CommBank the last to follow suit), in response to APRA’s crackdown on risky lending.
According to Mozo’s mortgage repayment calculator, the financial burden of a 0.35% rate rise can add up. For instance, a property investor on an interest only Orange Advantage $500k home loan, would see his or her monthly repayments increase by $146 as a result of the rate rise, which is $1,752 over 12 months.
Last month ING Direct made the decision to tempt owner occupier's with cheaper 3 and 5 year fixed rate home loans, by up to 20 basis points.
The good news for homeowners paying both the principal and interest on Orange Advantage mortgages have been rewarded with a 5 basis point rate reduction.
Interest only borrowers looking to dodge the rate rises may be happy to hear that the bank will waive any switching fees until August 31, so that they can refinance to a lower rate principal and interest loan offered by them. All the latest ING Direct rate changes are due to kick in on Friday, 7 July.
Those set to take a beating from ING Direct’s rate changes may want to take their switching activities a little further by shopping around for a better deal at Mozo’s investment loan hub.