ING has followed the lead of several other Australian lenders by lowering its variable interest rates on home loans while increasing the rates on its two to five year fixed loan products, signaling its willingness to attract more borrowers with low variable rates as house prices continue to climb.
The Reserve Bank of Australia (RBA) announced last week that it would continue to keep the official exchange rate stable for now, but a number of Australian mortgage lenders have started to change rates, with ING being the latest. to follow the trend of raising long-term fixed rates while lowering variable rates.
Canstar can reveal that starting Thursday, November 11, ING will reduce variable rates on loans in principal, interest and interest only for homeowners and investors borrowing at least $ 150,000, while increasing its fixed rates on two, three , four and five years old. . Its one-year fixed interest rates will remain stable, and variable rate changes will also not apply to existing customers.
This decision means that ING will join the list of lenders in Canstar’s database offering a variable interest rate for home loans of less than 2%, with the rate on its Mortgage Simplifier – Principal and Interest decreasing by 0.25. percentage point at 1.99% (comparison rate 2.02%) for loans over $ 150,000 and borrowers with a loan-to-value ratio (LVR) of 80% or more. However, the bank’s fixed rate increases mean it will no longer offer a fixed rate starting with a 1.
The largest increases in this latest round of changes will be in ING’s three-year fixed rate loans for homeowners – for those with an LVR of up to 80%, this rate is expected to rise to 2.69% ( comparison 3.76%). 2.19% (comparison rate 3.64%), a difference of 0.50 percentage point. For Orange Advantage customers with the same LVR, the new three-year fixed rate will be 2.59% (comparison rate 3.74%), also up 0.50 percentage point from 2.09% (comparison rate 3.61%).
ING’s rate changes are roughly in line with recent actions taken by various other mortgage lenders – the National Australia Bank recently increased the rates on its fixed-rate mortgage loans to two, three, four and five years, while reducing variable and fixed rates to one year. fixed rates, while others, including CommBank and Westpac, have also increased some of their fixed rates in recent weeks.
How have ING’s tariffs evolved over the past year?
ING’s variable rates have generally fallen since the same period last year. For example, Canstar researchers found that owner-occupants of the Orange Advantage Variable Interest Only loan product, with a mortgage of $ 500,000 and an LVR of 80%, would have had an interest rate of 3.59% at the same time last year.
When ING’s new variable rates go into effect on November 11, 2021, borrowers on the same loan product would have an interest rate of 2.74% (comparison rate 3.08%), a decrease of 0 , 85 percentage point.
On the fixed rate front, Canstar’s research found that while ING’s one-year fixed rates won’t change tomorrow, they have also fallen across the board since the same period last year, with the largest change in its principal and interest at a fixed rate of one year. loans to investors.
Investors with a mortgage of $ 500,000 and an LVR of 80% had a rate of 3.09% available to them at the same time last year, while the current rate is 2.34% (comparison rate 4.56%), which represents a decrease of 0.75 percentage point.
Longer-term fixed rates have increased, however. Orange Advantage owner-occupant customers on the same $ 500,000 loan and 80% LVR, for example, will pay 2.99% (compare rate 3.68%) after this latest round of changes, an increase of 0.40 percentage point compared to a year ago.
With these trends in mind, Canstar financial expert Steve Mickenbecker recently warned that the current low rates on variable rate and short-term loans will not last forever, and Australians may need to consider a ” interest rate protection âin anticipation of future rate hikes. .
Fears that rising rates will push borrowers into mortgage stress
Interest rates in Australia remain at historically low levels, but with house prices rising and Australians paying more and more for houses, there is a potential danger that an increase in the official exchange rate will push the homeowners with mortgage credit problems in the years to come.
The RBA may be keeping the cash rate at an all-time low of 0.10% for now, but Mr Mickenbecker warned there could be pressure to raise it earlier than his previously stated target of 2024 , and rate hikes in the coming years could push some Australian borrowers into mortgage stress.
âCanstar’s analysis shows that if the cash rate increased by 0.25 percentage points and lenders passed it on in full, a residential borrower with a $ 1 million mortgage on the average variable rate of 3.09% would see her monthly loan payments increase by $ 137 to $ 4,402. “said Mickenbecker.
âFor a residential borrower with an average variable rate loan of $ 500,000, a rate hike of 0.25 percentage points would see their monthly payments increase by $ 68 to $ 2,206.
âBut that would only be the start of the race for rate hikes, and a year later the cash rate would surely rise by a percentage point. If that happens, the borrower with a $ 1 million mortgage would see their monthly payments increase from $ 561 to $ 4,826, which is quite a stretch. “
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