Investment loans get hit again after CommBank hikes interest rates

THERE’S more bad news for investors after the Commonwealth Bank announced it was hiking interest rates and that might not be the worst of it.

INVESTORS are tipped to be hit by more interest rate rises this year after the nation’s largest bank, the Commonwealth Bank, today announced it was hiking interest rates on investment loans.

Despite the Reserve Bank of Australia keeping the cash rate on hold at 1.5 per cent this month, lenders are increasingly clamping down on investment loans and pushing rate deals up.

COMMONWEALTH Bank shuts the door on refinancing investment loans

CBA announced it’s first half-year profit — it rose 2.1 per cent to a record profit of $4.9 billion — however there’s no relief in sight for mortgage customers.

Just last week CBA revealed it had slammed the door shut on new customers looking to refinance their investment loans with the bank.

Financial comparison website Mozo’s spokeswoman Kirsty Lamont said lenders are really cracking down on investment loans and more hikes are expected.

Financial comparison website Mozo’s spokeswoman Kirsty Lamont said lenders will continue to crackdown on investment loans. Picture: News Corp

“This is in response to a surge in investor credit growth in the spring 2016 property season which generated concerns the banks may be breaching the 10 per cent growth cap on investor lending,’’ she said.

“The response from lenders has been swift, since December last year we have seen 39 lenders increase their investor lending rates and six of those increases have happened this month.”

The banking regulator, the Australian Prudential and Regulation Authority, announced a 10 per cent cap on growth in investment lending in 2015.

Reserve Bank of Australia Governor Philip Lowe kept the cash rate on hold this month at 1.5 per cent. Picture: AAP

Mozo analysis shows lenders to hike investment loan rates in February includes smaller lenders Australian Unity, Big Sky, Defence Bank, Ratebusters and Regional Australia Bank.

CBA will hike interest-only investor home loan rates for investors by 0.12 per cent to a new standard variable rate of 5.68 per cent from April 3.

On a $300,000 interest-only loan this increases monthly repayments by $30 per month to $1420.

However customers can avoid the rise by switching their loans to principal and interest repayments.

Home Loan Experts’ managing director Otto Dargan said investors should expect to see more rate rises in the coming months.

Home Loan Experts’ managing director Otto Dargan said investors should expect more rate rises to come.

“What this means for property investors is that there are fewer competitive choices for them when they apply for a loan,’’ he said.

“If they go with a bank who has a low variable rate now then there’s every possibility that the bank will increase their rate later.”

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INTEREST RATES

Ave standard variable rate Monthly repayments 3 year fixed rates Monthly repayments

Owner occupier 4.87% $1587 4.11% $1451

Investor 5.14% $1636 4.32% $1488

Source: Mozo. NB: On a $300,000 30-year home loan.

Originally published as Investment loans get hit again after CommBank hikes interest rates