Westpac follows ANZ’s lead with interest-only home loan rate increases
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.
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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.
Top home loans - rates updated daily
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Promoted
ING2.59% p.a. variable
2.62% p.a.
$1234
Product details Close detailsINGMortgage Simplifier
LVR<80%, Owner Occupier, Principal & Interest
2.59% p.a. variable
2.62% p.a.
Enjoy no ongoing monthly or annual account-keeping fees. Unlimited additional repayments. Redraw facility available. If you choose to round up your Orange Everyday, every card purchase will help to directly reduce your outstanding home loan balance.
Mortgage Simplifier
Enjoy no ongoing monthly or annual account-keeping fees. Unlimited additional repayments. Redraw facility available. If you choose to round up your Orange Everyday, every card purchase will help to directly reduce your outstanding home loan balance.
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2.59% p.a. variable
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2.62% p.a.
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$299
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$0.00
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$250.00
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yes - free
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yes
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no
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$299
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80.00%
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$150,000
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$999,999
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Variable
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Principal & Interest
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Owner Occupier
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Fortnightly, Monthly
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Promoted
Macquarie2.19% p.a.
fixed 2 years2.65% p.a.
$1234
Product details Close detailsMacquarieBasic Home Loan
Fixed, Owner Occupier, Principal & Interest, LVR<70%
2.19% p.a.
fixed 2 years2.65% p.a.
Flexible loan structure – create up to six loan accounts with different rate and repayment types. Free redraw from your loan using Macquarie Online.
Basic Home Loan
Flexible loan structure – create up to six loan accounts with different rate and repayment types. Free redraw from your loan using Macquarie Online.
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2.19% p.a.
fixed 2 years -
2.65% p.a.
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$0
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$0.00
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$400.00
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yes - free
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yes - free
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no
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$0
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70.00%
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$150,000
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$750,000
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Fixed
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Principal & Interest
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Owner Occupier
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Monthly
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Promoted
loans.com.au1.99% p.a.variable for 12 months and then 2.57% p.a. variable
2.55% p.a.
$1234
Product details Close detailsloans.com.auSmart Booster 1 Year Discount Variable Home Loan
1.99% p.a.variable for 12 months and then 2.57% p.a. variable
2.55% p.a.
A super low introductory rate home loan with no monthly or ongoing fees. Unlimited free redraws and unlimited additional repayments to help you build your equity and own your home sooner. Multiple loan splits available. (Rates revert after introductory period ends).
Smart Booster 1 Year Discount Variable Home Loan
A super low introductory rate home loan with no monthly or ongoing fees. Unlimited free redraws and unlimited additional repayments to help you build your equity and own your home sooner. Multiple loan splits available. (Rates revert after introductory period ends).
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1.99% p.a.variable for 12 months and then 2.57% p.a. variable
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2.55% p.a.
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$520
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$0.00
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$0.00
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yes - free
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yes - free
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no
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$520
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80.00%
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$50,000
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$1,000,000
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Variable
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Principal & Interest
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Owner Occupier
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Weekly, Fortnightly, Monthly
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Promoted
UBank
2.14% p.a.
fixed 3 years2.41% p.a.
$1234
Product details Close detailsUBank UHomeLoan
Owner Occupier, Principal & Interest
2.14% p.a.
fixed 3 years2.41% p.a.
$0 fees and easy application with the Mozo Experts Choice Home Lender Bank of the Year.^ Choose between weekly, fortnightly or monthly repayments. 3 year fixed rates are for new Owner Occupier Principal & Interest loans.
UHomeLoan
$0 fees and easy application with the Mozo Experts Choice Home Lender Bank of the Year.^ Choose between weekly, fortnightly or monthly repayments. 3 year fixed rates are for new Owner Occupier Principal & Interest loans.
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2.14% p.a.
fixed 3 years -
2.41% p.a.
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$395
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$0.00
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$0.00
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yes - free up to $20,000 p.a.
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no
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no
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$395
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80.00%
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$100,000
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$2,000,000
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Fixed
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Principal & Interest
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Owner Occupier
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Weekly, Fortnightly, Monthly
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Promoted
Homestar 2.29% p.a. variable
2.32% p.a.
$1234
Product details Close detailsHomestar Star Essentials Home Loan
Owner Occupier, Principal & Interest
2.29% p.a. variable
2.32% p.a.
Low Cost Home Loan 2020 winner.^ A home loan packed with all the essentials and offering up to $1500 cashback and no ongoing fees. No Construction loans.
Star Essentials Home Loan
Low Cost Home Loan 2020 winner.^ A home loan packed with all the essentials and offering up to $1500 cashback and no ongoing fees. No Construction loans.
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2.29% p.a. variable
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2.32% p.a.
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$515
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$0.00
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$535.00
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yes - free
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yes - free
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no
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$515
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80.00%
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$150,000
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$850,000
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Variable
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Principal & Interest
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Owner Occupier
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Weekly, Fortnightly, Monthly
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Refinances receive up to $1,500 cashback or upfront fees waived on purchases for applications received by 30 September 2020 and settled by 31 December 2020.
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