Borrowers still reeling from earlier out-of-cycle mortgage rate hikes are set to be slugged with another round of increases following the federal budget’s recently announced $6.2bn bank levy, which will take effect on July 1.
Early warning signs indicate that the levy, which applies to the five biggest banks in Australia, will be passed on to customers. In other words, customers may have to pay tens of thousands of dollars more over the life of their mortgages if they fail to refinance with a different lender.
Customers wishing to dodge the bank-levy bullet should consider refinancing their home loans by the end of the month. This is because the average time taken to settle a home-loan refinance application is 17 days.
Members of the Big Five have begun to shift their strategy
CBA
Commonwealth Bank of Australia (CBA) has relaxed rates and conditions on some investor property loans as rivals raise their rates. This move should help CBA attract a new wave of refinance applications, as more interest-only borrowers are likely to be seeking lower monthly repayments by switching lenders or loans.
Westpac and subsidiaries
Westpac Banking Corporation and its subsidiaries—BankSA, Bank of Melbourne, and St George—recently announced a wide range of changes to home loan products across the board.
Westpac led the charge by increasing the rates on its fixed-rate investment property loans, as well as SMSF and non-resident fixed investment property loans with interest-only repayments, by 20 basis points. These changes went into effect last Monday.
At BankSA, Bank of Melbourne, and St George Bank, a number of changes were made to interest rates across a range of owner-occupier and investment products, effective since last week.
For standard fixed-rate principal and interest mortgages, the three-year fixed-rate for owner-occupiers has declined by 21 basis points, while the three-year fixed-rate for residential investment has declined by 30 basis points.
The interest rate for these lenders’ residential investment standard fixed-rate interest-only loans has increased by 20 basis points for terms between one and five years. Moreover, a similar increase of 20 basis points has been implemented across all portfolio fixed-rate loans, of one- to five-year terms.
Westpac’s subsidiaries have also extended the current $1,500 Refinance Cashback offer for owner-occupiers and investors (this was previously due to expire on May 31). Those eligible for the offer will need to refinance from outside Westpac or its subsidiaries.
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