With 3 rate drops of 0.25% in 2019 so far and the Reserve Bank of Australia cash rate at a record low of 0.75% it has never been more important for your investors to take a look at their investment mortgages.
Investor Interest rate drops
If we analyse the October rate cut of 0.25% from the big four banks you will note that the most significant reductions are on Investors with Interest Only Loans:
| Repayment Type | ANZ | CBA | Westpac | NAB |
| Principal & Interest | -0.14% | -0.13% | -0.15% | -0.15% |
| Interest Only | -0.25% | -0.25% | -0.15% | -0.30% |
If we drill down to Interest Only Loans you will note that Investors with Interest Only Loans have benefited most from this year’s rounds of cuts:
| Month | RBA | ANZ | CBA | Westpac | NAB |
| June | -0.25% | -0.18.% | -0.25% | -0.35% | -0.25% |
| July | -0.25% | -0.25% | -0.25% | -0.30% | -0.19% |
| October | -0.25% | -0.25% | -0.25% | -0.15% | -0.30% |
| Total | -0.75% | -0.68% | -0.75% | -0.80% | -0.74% |
Australia’s big four banks now face a new inquiry over their failure to pass on in full, official interest rate cuts engineered by the central bank. The treasurer, Josh Frydenberg, has asked the competition watchdog, the Australian Competition and Consumer Commission (ACCC) to examine why many mortgage holders are being charged rates well above the cash rate record low of 0.75%. The ACCC said they would investigate why banks set rates where they do, and make them more accountable for those decisions.
In defence of the Banks they have previously cited funding costs and the impact upon Deposit Accounts as a reason why not all reductions could be passed on.
Australian Prudential Regulation Authority (APRA) removal of the 10% benchmark on banks investor loan book growth, together with these cuts could be seen as a sign that the banks are back in the market for investors. This together with the recent reduction to loan assessment rates means that now is a good time to review your existing facility or your decision to purchase your next investment.
Don’t take my word though, Rod Sims, chairman of the ACCC, said consumers should become “active players” in the market rather than signing for a mortgage and then not reviewing the terms until it is paid off. Sims said “I think you are better off being an active player in the market if you are a consumer and hopefully the work we do will give consumers more information about how to engage with the mortgage interest rates markets”.
My advice is to contact your mortgage broker, or me, who can explain all about the interest rates from the different banks and who will lend what.
Ifraaz Ali – Home Loan Connexion
Email: iali@homeloanconnexion.com.au
Mobile: 0423 693 110
General Advice Warning
This blog is not designed to replace professional advice. It has been prepared without taking into account your objectives, financial situation or needs. You should consider the appropriateness of the advice, in light of your own objectives, financial situation or needs before making any decision as to what is appropriate for you. HLC Management Pty Ltd | Australian Credit License 387 419
