Interest only loans for investors hit by rate hikes up to 0.39%

Wednesday 05 April 2017

Article by Kelly Emmerton

A spate of recent mortgage rate hikes by lenders has been making news lately, but there’s one set of borrowers who are being hammered worse than any others: investors with interest only loans.

Interest only loans for investors hit by rate hikes up to 0.39%

Mozo data has shown that investment loans are bearing the brunt of the recent rate increases, with a number of lenders making increases higher than the typical RBA rate jump of 0.25%.

Investors looking to make principal and interest repayments got off relatively lightly, with only a handful of lenders making increases north of 0.25%. These include Mystate, which lifted its rate by 0.28%, as well as Macquarie and Yellow Brick Road, which made increases ranging from 0.25%-0.30% and 0.25%-0.32% respectively.

Of the 31 lenders who made increases to their principal and interest investment rates, 14 made increases equal or higher to 0.25%.

RELATED: See the full list of lenders who hiked rates in March here

Those looking to buy an investment property and make interest-only repayments, however, saw quite a few more steep rate hikes.

29 lenders made increases to interest-only investment loan rates, 9 of which were higher than 0.25%. The steepest hike came from Bank of Melbourne, which boosted its rate by 0.39%, followed closely by a 0.38% increase from CommBank. Another big bank, ANZ, was responsible for the next biggest hike of 0.36%.

BankSA increased its rate by 0.32%, and Yellow Brick Road lifted its rates within a 0.25% - 0.32% range. St.George announced an increase of 0.31%, while RAMS, MyState and big bank Westpac all increased by 0.28%.

A further 10 lenders - including big bank NAB - increased by 0.25%, leaving only 10 lenders who raised rates less than the equivalent of a full RBA rate cut.

All these steep rate hikes come despite the fact that at its April meeting, the Reserve Bank opted to keep the official cash rate steady at 1.50%, and all predictions point to it staying there until 2018.

RELATED: When will Sydney property prices start to cool?

But Mozo’s property expert, Steve Jovcevski, says this latest round of rate hikes likely won’t be the last.

“I’d be expecting another round of rate increases before the RBA moves, maybe around November, and I can’t imagine investors will be able to avoid getting stung,” he said.

“Plus, with APRA cracking down on interest-only lending, banks will be looking to recoup lost profits - that often means higher rates for borrowers.”

RELATED: What will the APRA mortgage lending restrictions mean for borrowers?

So if you’re looking to pick up an investment property, it’s more important than ever to shop around for a great value home loan. Luckily, there are still some competitive offers in the market and you can find them using Mozo’s home loan comparison tool.

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