Home loan rates are on the move

Home loan rates are on the move

Posted on Wednesday, October 14 2015 at 11:59 AM

As one of the big four banks – Westpac – announces its variable home loan rate rise, borrowers are being warned to be prepared for further hikes, with other lenders expected to follow.

Westpac has announced an increase to its variable home loan rates of 0.20 percentage points, effective as of November 20.

Michelle Hutchison, money expert at comparison website finder.com.au, says there have actually been many out-of-cycle home loan rate changes since the last cash rate cut in May.

“It’s interesting to see so much movement in the variable home loans market, particularly when it’s outside the Reserve Bank cash rate cycle.”

Hutchison says the finder.com.au database reveals that 407 variable home loans have changed their rates out of cycle since June this year, 352 of which decreased.

“With low funding costs and record high household deposits, it seems unusual for banks to be lifting variable rates out of cycle right now,” she says. “However, Westpac could be preparing early for APRA’s capital requirements of the average risk weight on Australian residential mortgage exposures to increase from 16 per cent to at least 25 per cent by July 2016.

“Total household bank deposits is at a record high of $737.3 billion, according to the latest APRA data analysed by finder.com.au,” Hutchison adds. “Westpac’s household deposits is also sitting at its highest level, at almost $171 billion, as at August 2015.

“The biggest concern is that Westpac’s rate rise could open the floodgates for the other big banks and the rest of the home loan market to follow, so we’re expecting to see more variable home loans rise in the coming months.

“Westpac holds 23 per cent of the owner-occupied home loan market share out of all banks monitored by APRA, while the big four banks hold a combined 82 per cent. They set the benchmark for the entire mortgage industry.

“We’re clearly seeing banks respond to APRA’s crackdown, and expect to see further movement… so watch this space,” Hutchison warns. “For borrowers, it’s definitely the time to do your research when shopping around for a home loan to ensure you’re getting the best possible deal for your situation as competition looks set to get tighter.”


Extra cost per month for different home loan sizes

Source: finder.com.au/home-loans

Based on current average variable home loan rate of 5.1%

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