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Home loan rates change under new capital adequacy requirements

What are the new capital adequacy requirements, and how have rates changed since the announcement?

What are the new capital adequacy requirements?

In July 2015, APRA announced that from July 2016 onwards, some Australian lending institutions will have to hold a larger amount of capital reserves for their residential mortgages in order to reduce their credit risk.

The changes are an attempt to address the Financial System Inquiry (FSI), which recommended that APRA should set standards for capital adequacy so that Australian institutions’ capital ratios would be “unquestionably strong”. The banking institutions affected by the APRA announcement are the Big 4 (ANZ, Commonwealth Bank, National Australia Bank and Westpac) as we’ll as Macquarie Bank.

Have rates changed since the announcement?

So have home loan rates changed over the past 12 months?

As the tables below show, the changes have been different when it comes to investor loans and residential home loans.

The difference is actually larger for property investors. It’s not just the Big 4 and Macquarie Bank who have moved on rates – other banks, customer-owned institutions, and mortgage brokers have raised their rates as well.

Some commentators have wondered why the smaller banks didn’t take advantage of the “level playing field” by leaving their rates lower as the big banks were forced to bump up their rates. Instead, their choice to raise rates as well seems determined to boost their bottom line. But the Governor of the Reserve Bank of Australia, Glenn Stevens, has not condemned the smaller banks’ decision. In a statement in November 2015 he pointed out that these slight increases will not rock the boat much.

“While the recent changes to some lending rates for housing will reduce this support slightly, overall conditions are still quite accommodative.”

Investor Standard Variable Home Loans
Average increase in advertised rate from 1/7/15 to 1/4/16
ANZ 0.45%
CommBank 0.42%
NAB 0.32%
Westpac 0.47%
Average across
the Big 4
0.42%
Macquarie Bank 0.30%
Average across
Big 4 + Macquarie
0.40%
Banks 0.18%
Credit Unions,
Building Societies
and Mutual Banks
0.17%
Finance Companies
and Mortgage Managers
0.17%
Source: www.canstar.com.au

Based on $350,000 loan amount and 70% LVR.

Residential home loans have also seen some significant movements for the Big 4 and Macquarie Bank, but other banks and institutions have shown no change or almost no change.

Residential Standard Variable Home Loans
Average increase in advertised rate from 1/7/15 to 1/4/16
ANZ 0.18%
CommBank 0.15%
NAB 0.17%
Westpac 0.20%
Average across
the Big 4
0.17%
Macquarie Bank 0.10%
Average across
Big 4 + Macquarie
0.16%
Banks 0.01%
Credit Unions,
Building Societies
and Mutual Banks
0.01%
Finance Companies
and Mortgage Managers
0.00%
Source: www.canstar.com.au

Based on $350,000 loan amount and 80% LVR.

Finding value as rates rise

Of course, as always, there is value to be found if you compare your home loan options on the CANSTAR website. Even simply knowing the market’s average interest rate is a powerful bargaining tool if you’re thinking of refinancing a loan.

 

Compare Home Loan Interest Rates

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