Popular lenders hike rates by up to 20bp as major markets continue to slide

Digital bank ING Australia and Teachers Mutual Bank, one of the nation’s largest mutuals, are announcing another round of rate hikes in response to rising funding and regulatory costs as new analysis shows Melbourne and Sydney residential property values continue to slide.

The increases are being announced on the eve of the Reserve Bank’s final board meeting for the year at which cash rates are expected to be held at 1.5 per cent amid falling property prices and auction clearance rates.

Teachers Mutual and affiliates UniBank and Firefighters Mutual are increasing rates by 20 basis points for new and existing variable home loans for both owner occupiers and investors opting for principal and interest repayments.

The increases apply to all brands and products.

Last month the bank and affiliates increased interest rates by 10 basis points on two and three year fixed rate loans and reduced the loan to value ratio to 90 per cent. A range of emergency and educational occupations were exempted from having to have a bigger deposit.


The lenders have also responded to regulatory pressure by tightening borrower standards and lower risk.

For example, its home loan assessment rate – which is a buffer the lenders adds to the standard variable rate- was recently raised by 7.3 per cent to 7.41 per cent.

ING Australia, which has more than 1.3 million customers, is increasing variable rates on its flagship Orange Advantage principal and interest and interest only owner occupier loans by 10 basis points for new loans.

In September the bank raised standard variable rates for new and existing property investors by 15 basis points, becoming the first of the high-profile second tier lenders to move in response to the recent round of hikes by the majors.

It has also tightened lending terms, such as excluding Australian citizens living overseas from making applications, but has recently reduced some fixed rates.

The lenders’ rate moves are based on the same range of internal and wholesale market funding pressures being faced by the majors.

The latest national property analysis by Herron Todd White, property advisers and valuers, shows that Alice Springs, inner Perth, Darwin and Bundaberg, in Queensland, have hit the bottom of the market.

Melbourne and Sydney, where property prices are predicted to fall by 15 to 20 per cent from peaks, continue to decline, and recent hot spots, such as Victoria’s regional Bendigo and the Gold Coast are starting to decline.

Victoria’s Gippsland, which is in the state’s south east, and the mid-north coast, are at the peak of the market.

Rising markets include Adelaide, Brisbane, Canberra, Launceston and Tamworth.

A fall of up to 20 per cent in Sydney will decrease the value of last year’s median sales price by up to $194,000, according to finder.com.au, which monitors rates and prices.

A similar fall in Melbourne would result in a fall of about $158,000 from last year’s median sales price.

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