How major bank rate changes could affect you

Westpac, Suncorp Bank, and Adelaide Bank have all announced interest rate hikes on home loans. So, what do these raises mean for your repayments?

If you have a home loan, recent interest rate changes could affect your repayments.

After Westpac increased rates 0.14 percentage points to 5.38 per cent on variable mortgage rate for owner-occupier properties, Suncorp Bank and Adelaide Bank then followed suit, as Canstar reported.

So, why are interest rates being raised, and what does it mean for you? Here’s a brief overview of what you need to know.

Background on the rate hikes
The biggest factor in the raises is increased wholesale funding costs. Australia’s banks depend on a pool of funds that is now becoming more expensive, ABC News says.

By increasing home loan interest rates, banks like Westpac can better manage their rising funding costs. But the move risks a bank’s reputation in order to better balance stakeholders’ interests, Bloomberg said.

Suncorp Bank announced it will increase rates by 0.17 percentage points on owner-occupier and investor loans. For small businesses, rates will go up 0.10 percentage points.

Adelaide Bank is going a bit further. They announced a raise of 0.40 percentage points across all existing variable rate loans. Investors that are on interest-only repayments will also see the 0.40 increase, and interest-only owner occupiers will see a 0.35 raise.

How will you be affected?
These rates could impact your day-to-day, Canstar says. For example, Suncorp Bank’s hike of 0.17 percentage points could raise a person’s monthly repayments by $40 per month if they had a $400,000 home loan.

In an already struggling housing market, that’s not great news.

Additionally, ABC reported that Aussies aren’t putting as much into savings as they have in the past. Plus, people aren’t likely to put more into savings if they’re paying more in interest. This may lead to a ‘negative feedback loop’, as ABC refers to the cycle.

How we can help you
If you would like more information on home loan rates or would like to speak to our team about refinancing, contact us today.