Following in the path of the big four banks, Macquarie Bank and St George (Bank of Melbourne) announced this week that they also will be raising their interest rates on standard variable rate home loans. The interest rates will rise by 20 basis points for Macquarie Bank and 15 basis points for St George. […]Read More
Following in the path of the big four banks, Macquarie Bank and St George (Bank of Melbourne) announced this week that they also will be raising their interest rates on standard variable rate home loans.
The interest rates will rise by 20 basis points for Macquarie Bank and 15 basis points for St George.
Why the increase?
The reason for this rise is due to new requirements from the Australian Prudential Regulation Authority (APRA). These recent changes have increased the amount of capital the banks need to allocate to their loan books. This policy has been put into place to ensure the major banks hold larger equity capital buffers so they are more resilient to volatility in financial markets.
While these requirements are a preventative measure against negative market movements, real estate market softening, economic slowdowns and foreign markets volatility, they will lead to additional costs for banks. These costs are being passed on to the consumer through higher interest rates instead so the banks don’t have to dip into their profits or reduce their investor returns.
How will this impact home loan customers?
The home loan industry is in an interesting state at the moment with heavy discounting between lenders. This makes it difficult for borrowers to get a clear comparison between different products and find the best deals.
It’s more important now than ever for borrowers to use the services of a broker who can help them compare the different products available and cut through the confusion. With a number of changes to investment lending policies recently put into place, professional advice is useful whether you are buying as an owner-occupier or for investment purposes.
What impact will this have on the industry as a whole?
The changes have led to an opportunity for non major banks to try to take some market share off the major banks so we are likely to see a number of competitive home loan products on offer by some of the smaller banks.
There has also been recent pressure on the Reserve Bank on the part of the retail industry to reduce the interest rate on Melbourne cup day among fears that the higher interest rates will lead to a drop in consumer confidence in the lead up to Christmas and retail sales will be affected.
Unsure how the interest rate changes will affect your home loan? Give us a call on 1300 996 997 to find out more about how we can help you get the best deal on your home or investment loan.