Time is running out to utilise non-majors as Suncorp raises IO rates, but non-banks may offer a solution
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Time is running out to utilise non-majors as Suncorp raises IO rates, but non-banks may offer a solution
On November 1st, rates on owner-occupier IO loans will rise by 0.10% p.a. and rates on investor IO loans will rise by 0.38% p.a.
“This change is important as it will ensure the bank can maintain its position relative to regulatory requirements,” Suncorp’s banking & wealth CEO David Carter explained. “With the market having effectively repriced interest-only lending, and with some lenders having opted out of certain aspects of the market, it’s important for us to also support the focus on this type of lending.”
Suncorp’s move comes less than a week after CBA introduced an additional form and ‘simulator’ for interest-only borrowers.
Majors vs non-majors
Suncorp's claim that despite the changes its rates remain ‘highly competitive’ and there is evidence that non-majors may offer a cheaper option to IO borrowers.
CANSTAR group executive Steve Mickenbecker, writing for MPA in an upcoming article, explained whilst the average IO owner-occupier rate had increased by 0.15% and IO investor rate by 0.40% since October 2016, there were major differences between lenders.
Major banks have increased IO investor rates by 1.17%, for example, whilst non-majors increased rates for this group by 0.75%. The average interest-only investor is paying 0.65% more than their P&I counterparts.
Non-banks
Judging by rates, non-banks could well be the new home for IO borrowers.
CANSTAR found that non-banks increased their IO rates for investors by 0.63% on average – less than majors and non-majors – with an average interest rate of 4.43% for IO investors. Virgin Money made waves in mid-September for cutting IO rates for its fixed-rate products.
The efforts by APRA and ASIC to reduce interest-only borrowing appear to be working, with the value of IO loans falling for the first time since 2009.
On November 1st, rates on owner-occupier IO loans will rise by 0.10% p.a. and rates on investor IO loans will rise by 0.38% p.a.
“This change is important as it will ensure the bank can maintain its position relative to regulatory requirements,” Suncorp’s banking & wealth CEO David Carter explained. “With the market having effectively repriced interest-only lending, and with some lenders having opted out of certain aspects of the market, it’s important for us to also support the focus on this type of lending.”
Suncorp’s move comes less than a week after CBA introduced an additional form and ‘simulator’ for interest-only borrowers.
Majors vs non-majors
Suncorp's claim that despite the changes its rates remain ‘highly competitive’ and there is evidence that non-majors may offer a cheaper option to IO borrowers.
CANSTAR group executive Steve Mickenbecker, writing for MPA in an upcoming article, explained whilst the average IO owner-occupier rate had increased by 0.15% and IO investor rate by 0.40% since October 2016, there were major differences between lenders.
Major banks have increased IO investor rates by 1.17%, for example, whilst non-majors increased rates for this group by 0.75%. The average interest-only investor is paying 0.65% more than their P&I counterparts.
Non-banks
Judging by rates, non-banks could well be the new home for IO borrowers.
CANSTAR found that non-banks increased their IO rates for investors by 0.63% on average – less than majors and non-majors – with an average interest rate of 4.43% for IO investors. Virgin Money made waves in mid-September for cutting IO rates for its fixed-rate products.
The efforts by APRA and ASIC to reduce interest-only borrowing appear to be working, with the value of IO loans falling for the first time since 2009.
