Westpac follows ANZ’s lead with interest-only home loan rate increases
Kelly Emmerton | 20 Jun 2017
Westpac has increased rates on interest-only mortgages by 0.34%, following changes from fellow big bank ANZ which hiked interest-only rates by up to 0.30% earlier this month, in what is becoming a growing trend among home loan lenders.
Westpac’s rate increase applies to both investors and owner-occupiers, bringing the standard variable rate on interest-only lending up to 6.30% and 5.83% respectively, as of June 30.
On a $600,000 loan over a 25 year term, this 0.34% increase to 5.83% p.a. could cost a home buyer an extra $36,827 in interest, according to Mozo’s home loan repayment calculator.
On the other hand, rates on owner-occupier loans with principal and interest repayments were decreased by 0.08%, bringing the standard variable rate down to 5.24%. Given the same loan conditions as above - a $600,000 loan amount over 25 years - this represents a saving of $8,508.
The move was aimed at least in part to nudging customers toward making principal and interest repayments on their home loans instead of just paying down the interest, in response to APRA’s tightened regulations around “risky” lending, introduced earlier this year.
George Frazis, Chief Executive of Westpac Consumer Bank, said, “We hope the rate reduction will encourage owner occupier customers with interest only home loans to switch to principal and interest repayments, helping them to pay down their home loan in this low interest rate environment.”
He also said there would be no switching fee for interest-only home loan customers to make the change to principal and interest repayments.
RELATED: Is the Sydney property market starting to cool?
The changes are part of a growing trend that has taken hold since APRA announced regulations which limit the flow of new interest-only lending to 30% of a bank’s total new residential lending and also placed restrictions on the volume of low-deposit lending.
Earlier this month, CommBank subsidiary Bankwest and big bank ANZ both made similar adjustments to their home loan interest rates, increasing rates on interest-only borrowing, while making cuts on principal and interest loans.
Before that, in May, a number of lenders made moves that followed the same pattern of cuts for principal and interest borrowing combined with rate hikes for interest-only loans, including big bank NAB, which also quadrupled deposit requirements for interest only loans.
With so many shifts in the market, borrowers will need to do their research to ensure they’re getting the best deal around. If you’re looking for a mortgage to fund the purchase of your dream home, make sure you compare home loans using our handy tool, or check out some of the top offers below.
Home loan comparisons on Mozo - rates updated daily
- loans.com.au
Essentials Variable 80
Owner Occupier, Principal & Interest
3.64% p.a. variable
3.66% p.a.
A low-rate home loan that could save you thousands. No monthly or ongoing fees. Unlimited additional repayments. Unlimited free redraws with no minimum redraw amount
-
3.64% p.a. variable
-
3.66% p.a.
-
$520
-
$0.00
-
$0.00
-
yes - free
-
yes - free
-
no
-
80.00%
-
$50,000
-
$2,000,000
-
Variable
-
Principal & Interest
-
Owner Occupier
-
Weekly, Fortnightly, Monthly
Details Close
-
-
Hot Deal Bonus $1,000 into a USaver account
UBankUHomeLoan - Discount Offer
Owner Occupier, Principal & Interest
3.59% p.a. variable
3.59% p.a.
Get $1,000 cash into a USaver account on a UHomeloan over $200k. (T&Cs apply).
-
3.59% p.a. variable
-
3.59% p.a.
-
$0
-
$0.00
-
$0.00
-
yes - free
-
yes
-
no
-
80.00%
-
$200,000
-
$699,999
-
Variable
-
Principal & Interest
-
Owner Occupier
-
Weekly, Fortnightly, Monthly
Details Close
-
- ME
Flexible Home Loan
Owner Occupier, LVR<80%, Principal & Interest
3.69% p.a. variable
4.11% p.a.
A flexible Home Loan with Member Package for Owner Occupiers including a low rate, redraw and offset. Annual fee $395. Experts Choice - Australia's Best Bank 2018.
-
3.69% p.a. variable
-
4.11% p.a.
-
$0
-
$395.00 yearly
-
$300.00
-
yes - free
-
yes - free
-
yes
-
80.00%
-
$400,000
-
$699,999
-
Variable
-
Principal & Interest
-
Owner Occupier
-
Weekly, Fortnightly, Monthly
Details Close
-
- NAB
Base Variable Rate Home Loan
Owner Occupier, Principal & Interest
3.69% p.a. variable
3.73% p.a.
Low ongoing rate. Free extra repayments and redraw facility. Only 5% deposit and no annual or monthly fees.
-
3.69% p.a. variable
-
3.73% p.a.
-
$600
-
$0.00
-
$350.00
-
yes - free
-
yes
-
no
-
95.00%
-
$20,000
-
-
-
Variable
-
Principal & Interest
-
Owner Occupier
-
Weekly, Fortnightly, Monthly
Details Close
-
- Newcastle Permanent
Discounted Variable Home Loan
Owner Occupier, Principal & Interest
3.64% p.a. variable
4.03% p.a.
Experts Choice - Australia's Best Customer-Owned Banking & Home Lender of the Year 2018
-
3.64% p.a. variable
-
4.03% p.a.
-
$0
-
$395.00 yearly
-
$0.00
-
yes - free
-
yes - free
-
yes
-
90.00%
-
$150,000
-
-
-
Variable
-
Principal & Interest
-
Owner Occupier
-
Weekly, Fortnightly, Monthly
Details Close
-
Mozo may receive advertising fees from the financial institutions, issuers of financial or credit products and third party advice providers that are shown on this page. These fees are based on a cost per click, cost per acquisition, or a fixed fee.
