As property values once again chart an upward trajectory, home equity will be increasing for many Australians. But are mortgage holders missing a trick by failing to refinance to the lower rates available for borrowers with greater equity?
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National Australia Bank made a number of changes to its fixed rate suite today, cutting rates for both owner occupiers and investors by between 5 and 55 basis points.The major bank reserved the largest cut for the 5-year term on the Tailored Home Loan (Choice Package). As of today, owner occupiers looking to fix long-term can now access rates as low as 2.24% p.a. (3.66% p.a. comparison rate*).Today’s reductions also saw headline rates for 3-year terms dip below the 2% mark, bringing them in line with NAB’s 4-year option, which has offered 1.98% p.a. (3.69% p.a. comparison rate*) since November last year.NAB executive of home ownership, Andy Kerr said the new rates are among the lowest offered by the bank.“Both our 3- and 4-year fixed rates for owner-occupiers paying principal & interest are now below 2 per cent, a level that would have seemed unbelievable just a few years ago. These changes will also offer our lowest ever rate to property investors,” he said.
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There’s been plenty of talk about how hot the property market is in 2021. Listings are up, auction numbers are spiking and home loan deals are being seized upon. Presumably many buyers have seen some daylight amid Covid-19 related news and fronted up to open homes with open wallets.
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It may be a new year, and the three Reserve Bank interest rate cuts of 2020 may be slowly disappearing in the rearview mirror, but the home loan rate cut trend hasn’t let up in 2021.
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Commonwealth Bank has announced it will soon be launching a new loan to help Australians adopt renewable technology and make their homes more sustainable.The CommBank Green Loan comes with a low 0.99% p.a. secured fixed comparison rate, and will be available to CommBank home loan and investment home loan customers looking to install eligible small-scale renewable technologies in their home. Customers will be able to borrow up to $20,000 to purchase items such as solar panels, battery packs and electric vehicle chargers. According to CBA, there will be no establishment or monthly services fees, and no penalties for early repayment.CommBank group executive Angus Sullivan said customers who switch to solar energy could see savings of more than $500 per year, which is enough to offset the loan repayments over the long run.”We have a responsibility to meet the current needs of our customers and the community while operating sustainably for future generations, and our new CommBank Green Loan will make financing more accessible,” he said.CommBank also noted that eligible technologies must be installed by an accredited technician who can ensure all industry best practice standards and relevant Australian Standards are met.“Over 2.7 million Australians have installed solar panels on their homes, and it’s a great way to reduce your power bills and reduce your household’s carbon footprint,” said Clean Energy Council’s chief executive, Kane Thornton.“By choosing a Clean Energy Council Approved Solar Retailer, you will be working with someone who has signed on to the Solar Retailer Code of Conduct and uses designers and installers who are accredited by the Clean Energy Council.”A pilot program will commence this month with national rollout of the CommBank Green Loan planned for May 2021. In the meantime, customers can register their interest at the Commbank website.
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There have been considerable shifts in the rental market in the wake of COVID-19.
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Banks can profit off home loan customers by postponing how quickly they pass on a Reserve Bank cash rate cut. Typically these are larger and more established banks, including the big four, and the latest Mozo research shows that delays by these lenders has seen them pocket $1.2 billion in additional home loan interest since 2011. From time to time, they’ve also responded with partial rate cuts or withheld rate relief from variable customers - if we add those instances into our calculations too, then their extra interest earnings since 2011 soar to $29.9 billion.In fact, our research found that following the official rate cut in November 2020, only 18 out of 95 lenders passed on the rate relief in full, while 15 passed on part of the cut. It’s worth crunching some quick numbers on this: at the current average variable home loan rate of 3.29%, the monthly repayment for owner occupiers paying principal and interest is $1,750. If all 95 lenders had passed on the 15 basis point cut in November in full, the new average variable rate would have been 3.19%.
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Online lenders have thrown down the gauntlet and proven themselves serious challengers to the big four banks. And this goes beyond attractive new branding.
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NAB has announced plans to purchase neobank 86 400, which it will combine with its digital offshoot UBank in a bid to accelerate growth and innovation.The decision is still subject to shareholder approval, though 86 400’s team of directors have unanimously recommended that shareholders vote in favour of the scheme. “This will significantly fast-track our growth, propelling our business, customer numbers and balance sheet to a position which would’ve otherwise taken five years,” said 86 400 chief executive Robert Bell.Since launching in September 2019, 86 400 has attracted 85,000 customers and $375 million in deposits with its mobile-led platform. It also has $270 million in approved residential mortgages.NAB became a minority stakeholder in 86 400 after purchasing 18.3 per cent of shares last year. It informed the ASX on Friday morning it intends to acquire the remaining shares, which it estimates will cost approximately $220 million.86 400 chairman Anthony Thomson said the partnership with UBank will allow the neobank to “dramatically accelerate our growth and reach even more Australians with our smarter approach to banking.”“It means we’ll be able to invest even more into developing smart products, experiences and services, helping our customers own their home faster and reach their goals sooner with smarter spending and saving.”UBank CEO Philippa Watson also struck a positive tone, saying the transaction will allow the two digital players to continue to deliver innovative banking solutions to Australians.“Combining with 86 400 will bring together UBank’s established business and 86 400’s experience and technology platform to meet the changing needs of our customers,” she said.The purchase will still need to be approved by various official bodies, including the Treasurer, the Australian Prudential Regulation Authority (APRA) and the Australian Competition and Consumer Commission (ACCC). It is expected to be finalised by mid calendar year 2021. Until then, both 86 400 and UBank will continue to operate as separate businesses.
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You may be at that point in your life when you’ve started to think seriously about buying a home. Maybe you’ve rented for a number of years now and you’re tired of handing over your hard earned dollars to someone else. That said, the thought of having to take out a home loan can also be quite daunting.
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