The Reserve Bank (RBA) may have kept the cash rate on hold but that hasn’t stopped some lenders from hiking their variable home loan rates. Here’s how borrowers are fighting back.
Homeowners may be celebrating two months of the RBA cash rate staying on hold. But don’t pop the champagne cork just yet. Mozo reports that some lenders have sneakily hiked their variable home loan rates in July despite the cash rate holding firm.
These hikes, known as ‘out-of-cycle’ rate rises, can fly under the radar. So it’s important to keep an eye on what your lender is doing.
Who’s hiking rates?
Mozo says ANZ, Commonwealth Bank, Macquarie, Easy Street and Great Southern Bank are among the lenders that have topped up their variable loan rates even though the cash rate has stayed on hold.
In some cases the upticks may be as little as 0.03% – but some lenders have lifted their variable rates by as much as 0.15%. On a $500,000 loan that could mean paying an extra $750 each year. And right now every penny counts.
As a result, some homeowners are taking matters into their own hands to help stay afloat.
One in two have changed their loan payments
Research by Canstar shows almost half of Australian mortgage holders are navigating higher rates by doing the following:
– 35% are reducing extra repayments,
– 29% are stopping extra loan repayments altogether,
– 26% are tapping into redraw or offset funds to help with repayments,
– 22% are refinancing to a lower rate loan, and
– 12% are extending their loan term.
Other changes involve switching to interest-only repayments, as well as more drastic moves such as selling a home or investment property.
Be warned though, altering repayment strategies can come at a cost.
While the above strategies can help get you through a tough time, it would be remiss of us not to mention that some of them can come at a cost over the long term.
Reducing or stopping extra payments, for example, means you’ll likely have your home loan longer and therefore pay more interest. Likewise, if you tap into your redraw or offset funds, you’ll pay more interest each month.
Last but certainly not least, by extending the term of a $500,000 loan at 6.73% from 20 to 25 years you could cut your monthly repayments by $348. But according to Canstar calculations, it could also mean paying a whopping $123,464 in extra interest over the life of the loan.
What can you do?
Those sneaky out-of-cycle rate hikes aren’t just annoying. They can leave you out of pocket while beefing up your lender’s profits. But you don’t just have to wear the cost.
The first step is knowing the rate you’re paying. Check your loan statements via Internet Banking or confirm with your lender. “If you’re not happy with your current rate, our dedicated team is here to discuss loan options for you.” said Dnister’s Lending and Member Servies Executive, Ivanka Bernyk. “As a Member owned institution our aim is to reinvest our profits to benefit our Members by providing competitive financial services at a minimum cost. Hopefully this translates to better rates and lower fees and charges.”
Call Dnister today on 1800 353 041 and arrange to speak with a Lending Specialist or book an appointment online.
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. In providing you with this information you should consider the appropriateness of this advice with regard to your particular financial situation and needs. We advise that you carefully read our Home Loan Key Facts Sheet and TMD before acquiring a loan product. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent. Applications are subject to Dnister credit assessment criteria. Interest rates are subject to change without notice and should be verified with your local branch. Terms and conditions, including fees and charges, apply. For full details on our products and an analysis of your personal requirements, please arrange for an appointment with one of our friendly lending staff by contacting your local Dnister branch.
