APRA’s crackdown on risky lending practices has made an initial impact on the market, new research shows.
New research released today by RateCity.com.au has revealed the majority of banks are now penalising investors and interest-only borrowers by as much as 0.56 percentage points.
Rate City’s analysis of over 100 lenders comes after ABS figures showed there was a there was a 2.3 per cent drop in investor lending in April.
RateCity.com.au money editor Sally Tindall said investors paying interest-only are being hit the hardest at an average rate of 4.88 per cent while owner-occupiers doing the right thing by paying down their debt are being rewarded with an average rate of 4.31 per cent.
People with a deposit of just 5 per cent were paying, on average, 0.18 percentage points more than people with a deposit of 30 per cent.
Ms Tindall said that while promoting sound lending measures was fundamentally important, she questioned the effectiveness of hiking rates to deter certain buyers. While a rate rise spooks investors initially, within six months they decide that paying extra is worth their while.
“Owner-occupiers opting to pay interest-only are also being hit with slightly higher rates, however, it pales in comparison to the bill they eventually have to pay as a result of not paying down their principal without the benefit of any tax concessions.
“The average mortgage holder with a $350,000 loan will pay $45,822 more to their bank if they opt for interest-only repayments for the first five years.
“That’s a pretty big deterrent right there,” said Ms Tindall.
She has said the average mortgage holder could save over $2,500 a year by switching to one of the lowest lenders on the market and over $70,000 over the life of a 30-year loan.