ME hikes home loan interest rates: does this mark the end of super low rates?

By Kelly Emmerton · · 2 min read
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Online lender ME has announced it is increasing home loan interest rates across its variable mortgage range effective today, citing increased funding costs as the reason - and it’s not the first to do so.

ME hiked its standard variable rate for existing owner-occupier principal-and-interest borrowers with an 80% LVR by 6 basis points, bringing it to 5.09% p.a. (5.11% comparison rate).

Existing investor principal-and-interest borrowers were hit with a bigger increase of 11 basis points, while interest-only borrowers saw the biggest increase of 16 basis points.

ME home loan rate changes - April 2018

                            

ME CEO Jamie McPhee said higher funding costs and an increase in regulatory requirements were the main reasons for the rate changes.

“Funding costs have been steadily increasing over the last few months primarily due to rising US interest rates that have flowed through to higher short-term interest rates in Australia,” he said.

“At the same time, industry reforms and increasing regulatory obligations are increasing our compliance costs.”

The move from ME follows a similar change from Suncorp in March, when it raised home loan rates by as much as 12 basis points, also citing funding pressure as the main reason.

“Funding costs have been steadily rising since the end of October. This has been driven by the outlook for US interest rates, as well as domestic factors,” said Suncorp Banking & Wealth CEO David Carter.

Mozo Data Manager Peter Marshall has been expecting funding pressures to result in more rate rises for a while now, and said borrowers can expect even more rate hikes to come.

“With the cost of finding overseas funding on the rise, I think a number of banks are going to start nudging their home loan rates up over the coming months,” he said.

“We’ve been in an incredibly low rate environment for a long time now - there hasn’t been an RBA rate rise since November 2010. But the RBA has flagged its intentions to start raising the cash rate, and the US Fed have already started raising rates, so Australia’s rock bottom borrowing rates can’t last forever.”

So if you’re borrowing or refinancing your existing mortgage, now’s the time to look around for a low rate option and maybe even to lock in a fixed rate. To get you started, check out some hot fixed rate home loan options below.

Home loan comparisons on Mozo

Mozo may receive payment if you click the products below. We don’t compare the entire market, but you can compare more home loans here.
Last updated 27 July 2024 Important disclosures and comparison rate warning*

  • Optimum Fixed Rate Home Loan

    • Owner Occupier
    • Principal & Interest
    Interest rate
    5.69 % p.a.
    Fixed 3 years
    Comparison rate
    6.34 % p.a.
    Initial monthly repayment
    $2,899
    Go to site

    Lock in a competitive interest rate and enjoy peace of mind for the fixed period. Available for owner occupied new and refinanced home loans with at least 20% deposit. Split option available as well as offset and redraw. Noapplication, ongoing or banking fees. Third Party fees may be applicable - payable within loan repayments. Extra repayments up to $20K per annum permitted. Apply online, 100% member owned credit union.

  • Flex Home Loan

    • Fixed
    • Owner Occupier
    • Principal & Interest
    • LVR <60%
    Interest rate
    5.99 % p.a.
    Fixed 3 years
    Comparison rate
    6.34 % p.a.
    Initial monthly repayment
    $2,995
    Go to site

    Competitive Fixed rate. Multiple offset accounts available. Borrowers can also make extra repayments. Redraw facility available. Simple online application process. 40% deposit required.

  • Basic Home Loan

    • Fixed
    • Owner Occupier
    • Principal & Interest
    • LVR<70%
    Interest rate
    6.25 % p.a.
    Fixed 3 years
    Comparison rate
    6.20 % p.a.
    Initial monthly repayment
    $3,079
    Go to site

    No upfront or ongoing fees. Free extra repayments and redraw facility. Option to earn Qantas points. Min 30% deposit required. Borrow up to $10,000,000.

  • Offset Home Loan

    • Fixed
    • Owner Occupier
    • Principal & Interest
    • LVR <70%
    Interest rate
    6.25 % p.a.
    Fixed 3 years
    Comparison rate
    6.42 % p.a.
    Initial monthly repayment
    $3,079
    Go to site

  • Fixed Rate

    • Owner Occupier
    • Principal & Interest
    • <80% LVR
    Interest rate
    6.54 % p.a.
    Fixed 2 years
    Comparison rate
    7.10 % p.a.
    Initial monthly repayment
    $3,174

    Enjoy up to $3000 cashback for eligible first home buyers and $2000 cashback for refinancers on eligible home loans with the ANZ Fixed Rate Home Loan. Get the security of repayment certainty with a competitive locked in rate. No ongoing fees to pay. Offset account on 1-year fixed loans ($10/month fee applies). Interest-only payments allowed.

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Need help with refinancing?

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Learn more

* WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate displayed is for a secured loan with monthly principal and interest repayments for $150,000 over 25 years.

** Initial monthly repayment figures are estimates only, based on the advertised rate. You can change the loan amount and term in the input boxes at the top of this table. Rates, fees and charges and therefore the total cost of the loan may vary depending on your loan amount, loan term, and credit history. Actual repayments will depend on your individual circumstances and interest rate changes.

^See information about the Mozo Experts Choice Home Loan Awards

Mozo provides general product information. We don't consider your personal objectives, financial situation or needs and we aren't recommending any specific product to you. You should make your own decision after reading the PDS or offer documentation, or seeking independent advice.

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