MoneysaverHQ’s David Koch on the rent vs mortgage debate.
THE heat is on the Commonwealth Bank to drop their owner occupier variable rates and follow the moves of the other big three banks.
National Australia Bank was today the third of the big four banks this month to give owner occupiers on principal and interest repayments some reprieve, reducing their rates by 8 basis points.
This drops the standard variable rate (SVR) to 5.24 per cent and will save borrowers on a $300,000 30-year loan an additional $14 per month, but investors on interest-only deals weren’t so lucky.
The bank followed a similar approach to rivals ANZ and Westpac, slamming investors failing to pay down their principal by lifting the SVR on interest-only deals by 35 basis points to 5.77 per cent.
This will cost the average borrower an additional $88 per month.
The move is in response to the bank regulator, the Australian Prudential and Regulation Authority’s regulatory requirements that have put a limit on new interest-only lending to 30 per cent for residential mortgages.
NAB’s changes kick in on June 30.
Mortgage Choice chief executive officer John Flavell said banks continue to try and steer away from interest-only lending and encourage borrowers to pay down their debts.
“Australia’s lenders do not want to take on interest-only customers at the moment,’’ he said.
“Instead Australia’s lenders are hungry for owner-occupiers who are happy to make principal and interest mortgage repayments.”
The Reserve Bank of Australia board meets again on July 4 and it’s expected they will keep the cash rate on hold at 1.5 per cent.
Despite this lenders continue to make out-of-cycle interest rate moves which means borrowers need to review their rates more frequently.
Financial comparison website Mozo’s spokeswoman Kirsty Lamont said the latest rate announcements by the big three banks could result in interest-only borrowers who are hit the worst to jump to alternative financial institutions.
“With the interest-only offers from the big four becoming less competitive, we’re likely to see interest-only borrowers look to switch to smaller lenders,’’ she said.
Originally published as Pressure on Comm Bank over rates