March 27, 2017
Australian homeowners are in for a continually shaky ride for 2017. National Australia Bank has just announced they will lift home loan rates, effective 24 March. If you have a mortgage with NAB, how much you will be impacted depends on what type of home loan you have. Rates will rise the most for property investors who will see a bump up from 5.55 percent per annum to 5.8 percent.
As an owner-occupier, your increase won’t be as steep. NAB is only moving their standard variable loans up by seven basis points, which will put rates at 5.32 percent.
The bank blames the rate increases on the rising cost of funding. Rates on Australian bonds, as well as global rates, have been increasing over the past nine months. The Federal Reserve in the United States has just recently raised rates again. This is the second time in the first quarter of 2017 that the Fed has raised rates as inflation rates in the US edge closer to normalcy and the economy continues to rebound since the global economic crisis.
As the cost of bond investments goes up, banks make less of a profit from their home loans unless they increase rates as well. Another reason, cites NAB, is APRA the bank’s regulator moving to crack down on growing investment lending. Rising rates and stricter regulations serves to cool the overall market. The unfortunate side effect is that you may end up having to pay more each month in your mortgage repayments.
This may be difficult for some homeowners as they will have to search for ways to cut other expenses as their mortgage repayments go up. Many Australians are getting a better rate by refinancing their home loans.
How much will you end up paying if your rates go up? NAB points out that its increase won’t harm borrowers very much. For investors, who will see the biggest increase, a 300,000 loan with a 30-year term will translate to $47 more each month. For owner-occupiers who have the standard variable rate loan, this would mean another $13 per month.
NAB has also lowered the rate on its two-year fixed rate home loan for first-time owner-occupier home buyers. This loan will be offered at a record low 3.69 percent. Antony Cahill, the bank’s chief operating officer, says, This is the lowest home loan rate ever offered by NAB, and it will help Australians entering the property market for the first time to achieve their home ownership dreams.
Under the climate of increasing funding costs, NAB, as well as other lenders, are trying to find the perfect balance between offering competitive rates to borrowers and adjusting to their rising costs. As a homeowner, you may want to consider refinancing your loan now before rates go up. In an environment where lenders are in the process of moving their rates up and down in some cases there are often opportunities to get a better deal on your mortgage if you shop around.
Written by Refinancing.com.au
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