Fixed home loan rates still on the move

by Madison Utley16 Mar 2019

Three banks – two non-major and one ‘big four’ – have announced changes to their loan offerings, several of which cater to customers with a higher LVR.

Both Macquarie and ME Bank rolled out home loan rate changes for new customers, while ANZ has implemented changes to its interest-only lending criteria.

“Just when we thought the banks were finding the kitchen a little too hot, we have seen ANZ and ME Bank move to encourage borrowers at the higher end of the LVR scale,” said Canstar’s group executive of financial services, Steve Mickenbecker.

At Macquarie, for both P&I and interest only repayment, owner occupier fixed rate loans will decrease by 0.09% and 0.20% and investment fixed rate loans will decrease by 0.05% and 0.10% for 1-, 2- and 3-year loans.

At ME Bank, owner occupier variable rate loans with principal repayments, for an LVR of more than 90%, will decrease by 0.80%. Investment variable rate loans with P&I repayments, for an LVR of 80% to 90%, will decrease by 0.27%.

This means that ME Bank’s P&I home loan will decrease from 5.26% to 4.46%, potentially saving borrowers tens of thousands in interest over the life of a longer-term loan.

“The reduction for owner occupiers at the very low deposit end of the market sounds bullish, but the reduction leaves ME mid range in the market,” said Mickenbecker.

The changes at both non-major banks went into effect on 15 March 2019.

ANZ announced that, as of 25 March 2019, the interest-only loan term will increase to 10 years, up from five. Additionally, interest-only loans will have a maximum LVR of 90%, up from the current 80% LVR.

According to Mickenbecker, through raising the LVR by 10%, ANZ is responding to its “over-reaction to the APRA tightening and is now moving to restore market share in the slow investor market.”

He continued, “Lengthening the interest only period will provide attractive differentiation in the market, but also give housing prices and wages time to recover before repayments have to increase to accommodate principal reductions. This should also improve customer retention rates.”