Australia’s Largest Lenders Decided To Charge More From Real Estate Investors And Profited $2.5 Billion
Home Owners aren’t off the Hook Either
Australia’s largest lenders have made an additional $2.5 billion simply from charging more for investors for their loans as compared to owner-occupiers. Financial institutions and banks are also keeping up with hammering both groups of consumers with hiking interest rates should they fail to look around for better deals.
Recent analysis provided by RateCity, a financial comparison website, shows that since the beginning of 2015, investors have seen not one but two distinct rate hikes that were definitively out of cycle. On the other hand, owner-occupiers only saw one such rate hike that was clearly out of cycle.
As a result, investors are spending more for their loans. Lenders to investors are now making more than they might have had they simply kept their rates in alignment with the Reserve Bank of Australia.
This is How Much Each Bank Made
RateCity was able to estimate the specific sums that particular institutions made starting from the beginning of 2015, and they did this based on the interest rate changes of the banks as well as APRA home loan figures. The data indicates that Westpac saw an additional $750 million, while Commonwealth Bank netted an extra $740 million. $570 million fell into the hands of National Australia Bank, while $440 million wound up in the lap of Australia and New Zealand Banking Group.
The data and insights director of RateCity, Peter Arnold, has gone on record as to say that borrowers ought to be shrewd so they can find great deals on interest rates. He warns that investors can continue to pay more than owner-occupiers, but notes that a few lenders don’t charge investors as much as others. He advises a minimum of 20 percent equity in either loan case, so that a rate less than 4 percent can be had.
The Banks Reckoned they Could Afford it
Australian Finance Group’s general manager for sales and operations, Mark Hewitt, has pointed out that investor loan market rates are not as sensitive to pricing given that many investment costs can be written off as tax deductions.
Consider a 30-year home loan totaling $300,000. At the time of writing, owner-occupiers were facing an average rate of 5.27 percent, whereas investors were closing in averages around 5.51 percentage points. In practical terms regarding monthly repayments, that meant investors were paying $45 more, with $1705 monthly obligations instead of the $1660 owner-occupiers were facing.
Don’t Despair – Shop Around
Mortgage Choice’s head of corporate affairs, Jessica Darnbrough, claims that even though investors are getting hammered with higher interest rates throughout the marketplace that deals are still very low. She pointed out loans that clocked in at 3.7 percent for owner-occupiers and 3.9 percent for investors.
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