Interest rates climb in July

August 4, 2015, Sydney: Despite the Reserve Bank’s decision to leave the cash rate unchanged at 2 percent today, some home loan rates have started to climb, new research from RateCity.com.au has revealed.

 

RateCity recorded interest rate hikes across 184 home loan products during July, with the most significant increases among the 5-year fixed term home loans.

 

Peter Arnold, financial analyst at RateCity, said there is constant fluctuation in home loan rates each month – both up and down – particularly among fixed rates. Yet, in July a trend towards higher rates for longer terms and investors has emerged.

 

“It’s the first time in almost five years that rates have started to trend up. The last time rates increased was in November 2010, when the RBA lifted the cash rate. Since then, rates have been flat or falling,” he said.

 

"The biggest movement this time was among the longer-term fixed home loan rates, with 5-year fixed rates increasing by as much as 0.30 percentage points, and 0.02 percentage points on average, in July – a significant shift after a long period of downward pressure in recent years.”

 

Arnold added that the movements were largely led by changes to investor loans, which had started to take effect – including some caps on LVRs, restrictions on which income is assessed in affordability calculations, and removing some discounts to investors.

 

“If you’re a property investor, the low-rate party is ending. Most of the majors have either announced or indicated that they’ll be charging more to investment borrowers,” he said.

 

“Two of the major banks have lifted rates on some of their investment loans, while decreasing rates for owner-occupiers.

 

“That said, home loan rates across the board are starting to edge up, with a number of home loans aimed at non-investors rising in July – a trend that we expect to continue.”

 

“While it’s unlikely that we’ll see big rate hikes from the lenders for some time yet, it is a reminder that what comes down can go back up and a warning to borrowers to not overstretch the budget,” he said.

Home loan repayments – now and at higher rates (2% buffer)

$300k home loan over 30 years
Variable	Rate	repayment	rate + 2%	repayment + 2%	difference in repayments
Lowest	3.94%	$1,421.89	5.94%	$1,787.10	$365.21
Average	4.68%	$1,551.70	6.68%	$1,931.19	$379.48
1yr Fixed	Rate	repayment	rate + 2%	repayment + 2%	difference in repayments
Lowest	3.49%	$1,345.46	5.49%	$1,701.49	$356.03
Average	4.41%	$1,504.49	6.41%	$1,878.96	$374.47
3yr Fixed	Rate	repayment	rate + 2%	repayment + 2%	difference in repayments
Lowest	3.94%	$1,421.89	5.94%	$1,787.10	$365.21
Average	4.50%	$1,519.31	6.50%	$1,895.38	$376.07