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NAB raised its home loan rates on the 24th January. The reason? The bank claims increases in wholesale funding costs have forced it into lifting rates. It means that standard variable loans will increase by 12 basis points to 5.36%. Based on a $700,000 loan over a 30-year term, homeowners will pay about $70 more each month for their mortgage. Residential investors with interest-only loans will pay an additional $93 each month.
With NAB raising its rates, it hasn’t taken long for others to follow. Both ING and the Bank of Queensland raised their rates. ING lifted them by up to 15 basis points for new and existing customers with a variable home loan. In other words, variable rates for all its existing mortgage customers will increase by 0.15% per annum.
Meanwhile, Bank of Queensland is increasing its one-year fixed rate by 10 basis points to a headline rate of 4.09% for owner-occupiers with principal and interest repayments. Like NAB, the Bank of Queensland also claimed that wholesale funding costs were forcing it to lift rates.
And ME Bank has also announced rate hikes from 7th February onwards. It will also increase rates by up to 18 basis points.
Rate raising always snowballs
If there’s one thing you can count on in life, it’s that when one bank raises rates other lenders will generally follow suit. So far, none of the other big four banks have raised rates yet. However, historically, the big four (Westpac, NAB, Commonwealth and ANZ) have tended to fall in lockstep with each other. For instance, after Westpac raised rates outside of the usual cycle last August, both ANZ and CBA followed shortly after.
And the current climate that the banks are operating in is highly competitive. There are more lenders than ever. The fierce competition is one factor as to why banks are paying higher rates for wholesale funding. A large fraction of banks’ income comes from wholesale markets. Yet this competitive market amongst lenders also provides a ray of sunshine for investors and owner-occupiers. A greater array of choice means there’s more chance of finding a competitive product that suits you.
Banks would like to lock you into their one-size-fits-all products that can have punitive repercussions such as interest rate rises or inflexible payment options that don’t suit you at all. But there is another way.
Digging deep to find the right mortgage product
As mentioned, the likelihood is that there’ll be further rate rises from some of the other lenders. However, at Shore Financial we have access to over 30 lenders and have great relationships with all of them. We have a deep knowledge of each of their loan products.
This means we’re able to find you excellent loan products you won’t find elsewhere. We can delve deep in the complicated pool of mortgage products to pick out one that suits you.
But it’s not just about finding cheap rates. We use carefully tailored strategies for each customer and structure a loan that meets your goals and allows you to invest in property. Our strong knowledge of both property and banking products is priceless and means we can assist you on your journey to wealth creation.
Levels 3 & 4, 153 Walker Street
North Sydney, 2060