IN BRIEF
Banks get tough
S
purred by the Australian Prudential
Regulation Authority (APRA),
thebigbanksandtheirsubsidiaries
are tightening their lending criteria
for borrowers.
Commonwealth Bank has
introducednewtestsforassessingloan
serviceability, including a 30% service
loading for new customers with existing
loansfromotherlenders.Forexisting
CBA customers, there will be an interest
rate buffer of 7.25%, or the current
product’s interest rate plus 2.25%
minus any existing rate concessions,
whicheverishigher.
CBA also recently changed its interest-
only loan criteria, with higher rates,
lower discounts and bigger deposits.
Bankwest,aCBAsubsidiary,haslifted
itsinterestratesby0.75%forborrowers
with loan-to-value ratios (LVR) – including
lendersmortgageinsurance–greater
than 95%.
Macquarie is also tightening its
eligibility criteri
suggesting that
the bank has
beguntoquery
the details of
its customers’
personal
spending.
NAB recently
announced that
it would cap LV
for new interes
only borrowers
at 80%.
The changes
come on the ba
of APRA’s push to limit new interest-only
loansto30%ofnewresidentialmortgage
lending, and to restrain lending growth
to borrowers with high LVRs.XMORE
MONEY
STORIES
ONP44-
MY MONEY
Fixed rate
comesatacost
Mark Bristow,RateCity
A
badly
timed
interest rate
increase can be
all it takes to break the budget
of a homeowner. And with
many banks raising their
variable interest rates, it’s
easy to feel nervous about the
future. Speculation
about further rises
makes fixing your
interest rate
tempting.
Currently, the
cheapest fixed
three-year home
loan on the
RateCity database
is with Easy Street
Financial Services at
3.59%pa (advertised
rate). This is only
atouchabovethe
cheapest variable rate on
themarket,theReduceHome
LoansRateBusterat3.44%pa.
Even if the banks and the
Reserve Bank hike rates, your
fixed-rate repayments will
remain consistent from month
to month. This can make
budgeting much simpler, which
can be handy for households,
especially first-time buyers,
with stretched finances.
For property investors,
fixedratescankeepaloan’s
repayments from increasingbeyond the rental income
during the fixed period. And
ifyourefinanceahomeloan
ontoalowerinterestrate,fixing
this rate can let you enjoy the
affordability for longer.
However, the stability of
afixedratecancomeatthe
cost of flexibility. Depending on
your lender, you may not get
tobenefitfromanoffset
accountorredrawfacility.
Fixing may also lock
you into a fixed
repayment plan,
where you’re
unable to
make extra
repayments,
and changing
your loan
terms before
the fixed term’s
expiry incurs
significant break fees.
While fixing your loan can
protect you from rising variable
rates, you won’t benefit from
any savings if rates drop.
Plus, you can usually only
fix for a limited length of time,
afterwhichtheratewill
typically revert to the lender’s
standard variable rate. Mark the
dateinyourdiary:thelastthing
youwanttodoisstartpaying
excessive interest on your loan
just because your fixed term
has come to an end.Health cover slug
can add $15,TOP 4
PROMOTIONAL
BONUS SAVINGS
ACCOUNTS
RaboDirect3.05%pa
advertised rate,
1.90%pa without bonus;
Newcastle Permanent
3.00%pa advertised rate,
1.50%pa without bonus;
Citi2.85% advertised
rate,1.70%pawithout
bonus;Bank of Sydney
2.8% advertised rate,
1.75%pawithoutbonus.
Source: Canstar as at
18-Jun-17.
According to iSelect’s database, there are almost
130,000 policy holders over the age of 55 who are
currently paying a lifetime health cover loading
ofatleast50%.Over10years,this could add
$15,000 to the cost of a policy.COMPILED BY STEPH NASHthenumberofiSelectcustomers
aged31andoverwhohada
lifetime health cover loading
applied to their hospital
cover last year.theaverageextracostof
lifetime health cover loading
on health insurance policies
per year.27% $
HOME LOANS