The low rate mortgage party is over for property buyers: Mozo

GUEST OBSERVER

With an RBA rate rise looming and big banks already hiking rates across fixed rate home loans, it seems the rock bottom rates of 2016 are now a thing of the past for property buyers.

All four big banks have now slammed home borrowers with rate rises in the past couple of weeks, joining another 14 lenders who have pushed up variable rates out of cycle this month alone. 

The big banks have a history of higher than average interest rates - so far, since 2009, all the big banks have increased rates by more than the RBA did two times each (except NAB, who did it once.) They also all held back a full RBA rate cut 7 times a piece (although ANZ only did it 6 times.)

There are a couple of reasons for these recent rate hikes - the excuse the banks have given is that cost of funding is getting higher, so loan rates need to increase as well. 

The likelihood of an RBA rate increase sometime next year is also a consideration, particularly for fixed rate offers, as banks factor that into current rates that they won’t be able to adjust for the next two years or more. So for the rest of this year at least, it seems rates will only be pushed higher.

Investors will have it particularly tough, with APRA breathing down the necks of lenders after investment loans spiked toward the end of 2016. CommBank, which grew its investment loan portfolio by 8.02 percent over the last 12 months, has already started tightening criteria for lending to investors by dropping LVRs and limiting refinancing loans.

In fact, Mozo data shows that the average big banks interest rate premium on variable rate investor loans has doubled in the last year.

So things are looking gloomy for borrowers hoping to get a foot on the property ladder with a low rate loan, especially since big bank loans now account for 85% of the investor loan market, and 81 percent of owner-occupier loans.

That means now, when record low rates seem to be squarely behind us, is the time for new borrowers to really do their research into what offer is going to work best for their budget, and for those already paying off a mortgage to re-evaluate their situation and decide if it’s worth refinancing to lock in a good deal while they’re still around.

STEVE JOVCEVSKI is a property investment and home loan negotiator at Mozo.com.au.