Borrowers have revelled in rock-bottom interest rates — many deals beginning with a “3” — but slowly lenders are increasing their charges as cost of funding pressures squeeze their margins.
Lenders including ING, AMP, Bank of Queensland, Bendigo Bank, Macquarie Bank and Pepper have all announced rate increases in recent weeks while the Big Four banks have remained noticeably silent.
Industry experts say it would be a “public relations disaster” if the bigger banks jacked up rates in the middle of the financial services Royal Commission and pressure would also be felt by over-leveraged customers with huge loans.
Latest data from financial comparison RateCity found on a $300,000 30-year home loan the average variable rate is 4.28 per cent and monthly repayments are $1481.
But if rates climb by one full rate rise of 25 basis points this will hit customers with an extra $44 per month.
Of the lenders who have moved the increases have ranged between six and 57 basis points.
RateCity spokeswoman Sally Tindall said “all eyes are on the Big Four” as to when they will increase mortgage raises.
“We expect to see the Big Four hike rates in the coming weeks and before September,’’ she warned.
“The banks’ profit margins are getting squeezed and the question is whether they ask their customers to stump up the difference or they absorb the costs themselves.”
Latest Reserve Bank of Australia figures show most Australians are well ahead of their mortgage repayments — balances sitting in offset accounts and redraw facilities are equivalent to about 2.5 years of scheduled repayments.
CommSec’s senior economist Ryan Felsman said there are increasing wholesale funding cost pressures on banks forcing many to increase their charges.
“While repayments are going to increase most people are quite comfortable at the moment and when they do increase it will only be by 5 to 10 basis points,’’ he said.
“It’s an added burden at the moment with cost of living pressures in particular including petrol prices at nearly three to four-year highs and rising electricity prices and wages growth is anaemic.”
Aussie Home Loans’ chief executive officer James Symond said now could be a good time for borrowers to opt to lock in their interest rate.
“For those seeking certainty of their mortgage repayments it is a good time to lock in a mortgage rate as many lenders are acting outside the Reserve Bank’s decisions to hold the cash rate and quietly raising them anyway,’’ he said.
The RBA has kept the cash rate on hold at 1.5 per cent since August 2016.