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.
Hot fixed rate home loans 2018 - rates updated daily
*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.
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