The RBA continues to hold rates at 1.5%.

So why are my loan repayments increasing?

There have been over 20 different rate rises by all the banks over a majority of loans just in the last 2 months.

How is that possible and why?

The reason is that APRA (which regulates the banks) on behalf of the RBA wants to make sure the “housing bubble” doesn’t burst.

So they have insisted the banks structure their lending products accordingly.

How?

1. By increasing the rates on interest-only loans and also investment loans
2. Changing the criteria for calculating serviceability for borrowers when making applications for any new lending.
3. Narrowing the type of lending that they are prepared to consider.

How does this affect you?

1. If you currently have any loans that are Interest only or deemed investment loans your rates will have gone up. Compare your last few statements. Banks should advise you on your statements when rates change.
2. If you are looking at a new purchase do not assume that based on the income you declared last time, that it will afford you the same level of borrowing capacity.
3. If your interest-only loans are coming to an end be prepared to pay principal and interest, even on investment loans.

So now what? You have some options.

1. Speak to your bank about switching to Principle and Interest loans for a lower rate.
2. Have a look at fixed rates. The banks usually have a headline rate that may lower your current rates for a short time.
3. Pour yourself a stiff drink before you see what rates your loans have risen to.
4. Call your broker.

Have a great day