Westpac hikes rates on all mortgages

Hello Westpac:

The bank said it would lift rates on variable rate loans for owner-occupiers with principal and interest payments by 3 basis points and for owner-occupiers with interest-only loans by 8 bps.

For property investors the variable loan rate for customers with principal and interest payments will rise by 23 basis points and for investors with interest-only loans they will rise 28 basis points.

 

Comments

    • Careful though. This is the banks way of responding to macroprudential. In pretending to discourage lending by raising rates they are trying to force the RBA into a cut. Another way to respond would have been to simply stop lending to investors but this way they make it the RBA’s problem. And if the difference between investors and OO rates gets too large, more investors are encouraged to switch the purpose of their loan.

      Until RBA gets serious about hiking they will keep gaming it.

      • I can’t see the RBA lowering any further… they can try squeeze all they like…

      • Russell, the die was cast several rate cuts ago. We now either move forward to draw in greater fools by using various incentives and access to super, etc. or the whole thing collapses and impoverishes millions.

        Lets assume FHB’s are allowed to use their super and the ponzi is maintained for another year or two, or three, what happens after that? Do we allow for more super to be withdrawn? How much? 50%? 100%? Its a roll’d gold arse-reaming wealth-transfer from the young to the old, dressed up by a billionaire PM as a housing affordability fix.

        The whole thing is ridiculously past its blow-up date as it is. The Govt understands this. So it comes up with numpty schemes like ‘super’ deposits without daring to look at negative gearing. It’s not duplicitous. They know that you now either push forward by enlisting ‘greater’ greater fools (young FHB’s as cannon fodder) or, well, its tata luv.

        All of this ignores too the very high likelihood of an international black swan event. Which is coming.

        Interesting times.

      • Yes, when you see knee jerk, clutching at straws, desperation tactics to keep the titanic afloat – all alarm bells start to ring. It smacks of desperation. This time I feel that this is getting close to something taking place – I cannot see massive gains going on much further – but that is just me. Somehow things seem to always overshoot – the clued up ones see it miles out but it always takes much, much longer to eventuate. I think even Joe average on the street is now very aware that something is not right. It is no longer a conversation that one would have tried to have had 2 years back and have your father in law or the likes look at you like you are nuts …now that same conversation is quickly averted since it leaves one feeling uncomfortable BECAUSE most people know that there is some REAL TRUTH to it all now… interesting times indeed.

      • The government should at least try for a soft(ish) landing. Introduce some subtle changes to discourage investors. Anything more substantial will see them panic and the market crash.

      • I remember having a conversation with a Melb neighbour a couple of years back, he has about a Year 11 education but has done well as an electrician / flipping houses. I tried to explain in the most eloquent way how what we’re seeing in Oz is not sustainable and will collapse and do years, possibly decades of damage to this country. Over a couple of weeks when I’d encounter him I talked about the GFC, global QE, China stimulus, mass immigration, money laundering, FHB’s incentives, price to income, price to rent, collapsing yields, unprecedented low rates and more.

        Anyway, prices have since gone batshit bananas and I’ve come across looking the complete fool.

        He’s not an intelligent man.

        But he feeds this bubble. Because that’s what this bubble is. And those are its credentials.

      • TailorTrashMEMBER

        Ortega ….my landlord drives a delivery van and owns 4 properties …..looks like him and the bank are smarter than I am ……….for now ? …..

      • False.

        They are responding to the US , despite this blog claiming otherwise.

        Furthermore they have already clamped down on investors, this is all about extracting from locked in customers – anyone who comes in now is not worth it – $1 million dollar loan for a basic home – only idiots would want in.

        They know its over, now its about hunkering down and nailing the shutters.

      • TailorTrash, does your delivery driver landlord have free title to the 4 properties or is he really a slave to the bank with an unacceptable amount of concentrated risk….

      • TailorTrashMEMBER

        …..he “owns” the properties ….at the banks pleasure ……as do the great many “investors ” in Sydney ………millions of debt to be paid off with delivery drivers wages
        ………….but we know that property in Sydney only goes up so all will be well ………and our banks are as solid as a rock ….best in the world maaaaate !

      • Ortega > A couple of years ago my friend who is rich invited me to his apartment. He was showing me the fleet of cars from residents who parked under the carpark. All you could see where, BMWs, Mercedes, Audi’s, etc. He then showed me his next door neighbors brand new M3 which was around $140k. I asked him “damn, what does this guy do for a living”. I thought his reply was “lawyer”, but turns out the guy was a plumber…. He then proceeded to show me the plumbers beat up ute. It dawn on me that people like us are risk adverse. People like these plumbers are willing to take risk, probably based on limited data. If all his mates are making money from buying property, he’ll go out and do the same. He’s not going to sit on the internet and research for hours about a possible downturn. They are do-er’s, we are sitters. Sometimes, too much information creates paralysis.

    • I have a family member who married in. Wont even share the same room as the rest of us as they consider themselves just too good. Literally say it to our faces.

      This person came straight out and said that they have set themselves up for life through their savvy real estate decisions. Has a child under 6 months old, mortgage well into the $600k – receptionist type job.

      Its so hard dealing with the arrogance – I warned them several years ago about impending disaster and now they laugh at me.

      Its really disheartening to know, to absolutely KNOW that this person will need to be put up one day in my own home, while I raise their children…….yet every bone of my being wants this housing crash to come so I can say “told you”. And that makes me a bad person.

      I want it to come because it will make this country a far, far better place – it will make people appreciate things more, look after each other and become more humble and understand life. Which makes it ok to want this crash.

      Its here though.

      Absolutely here.

      Scary.

  1. So state govts decide to throw FHB’s a bone with incentives to get them signed up as debt slaves.

    And… the banks decide to take that money, and then some, thank-you-very-much.

    What’s wrong with that?

  2. Not too bad for the Owner Occupiers (0.03% extra is not going to break too many) but the investors are going to cop it hard soon enough. Each BP is equal to $0.85 pm per $100,000 borrowed. So a $500,000 interest only investment loan is going to be costing another $116 pm.

    • Please explain? One phone call to the Bank saying ” I am now a OO” is all that is required. Switch done, problem solved!
      ATO coming after them is going to happen but not soon!

      • Except the bank probably knows about the Owner-Occupier property that is being used as collaterally for the loan in the first place. The banks aren’t stupid; you don’t make mega-profits by falling for fairly basic tricks.
        (Plus it hurts even more when there are multiply investment properties, you can’t claim to live in them all).

      • I can’t see that the ATO has any business in what loan you told the bank you’re changing to.

      • you haven’t factored in the new loan application fees, let alone the early exit fees from the investor mortgage

      • SwittersMEMBER

        @Cornflakes is right. Most of the IPs are concentrated in the hands of minority of the population holding multiple IP. They can’t declare them all OO even if they want to.

      • Not that easy mate. You have to re-do loan application which will incur thousands of $$, plus you’ll need to supply all financials again, e.g. tax assessments, etc.

    • I wonder what would douche-bag Nathan Berch or Tako guy or that train driver would do now?

      With more than 2 IPs, you cannot just increase rent by $120 per month. It will remain empty!

      • The rent for a $500,000 unit would have to be about $570 per week just to meet the interest on the loan. The only place where a 2-bedroom unit gets a median rent of that much in Melbourne is Port Melbourne (and there are not too many $500k 2-bedders in Port Melbourne).

    • Its just so sad.

      I am seeing people with two investment units two kids, paying rent, looking to buy a family home.

      A single tenant issue caused them mega stress. I know they are going down. I think a great deal of people know they are going down and just don’t know what to do.

      Its just horrific.

  3. If banks are restricted to 10 percent investment growth per year, what happens directly after the new financialyear? Can they drop them again?

    • NAB IP advertised rates are 5.90%! In short time, they will be testing the “serviceability” limits i.e. 7%. Now, throw in the mix of how diligent were the banks in checking against the serviceability criteria of “7%”, we will see the mushroom cloud is near future!

      • They are already testing “serviceability” at 7.25%. Even though official rates are around the 4% mark, all major banks are actually validating new loans at 7.25%.

    • absolutely! I wonder how much of that analysis a week or so ago, about how many owners would suffer mortgage stress on 20bps/50bps/100bps increments, will now play out in reality.

  4. The banks will be the ones who give this game away. And for me it has already started to happen with CBA / Bank West, tightening their standards a month or two again. When you see them trying to get the crap off their books, then you will know that this game is up.

    • So you think the banks are trying to move the over leveraged investors to the other credit providers? It would be smart if they managed to pull that one off. They won’t mind holding the Mum and Dad with one place on the books, but the people with a half dozen plus and no additional income will be ones they don’t want.

      • I’ll be taking lsd.
        more reality and happiness than in any doomscrash prophecy.
        Never underestimate .gov.au commitment to RE artificial life support. New tech can keep brain dead almost forever

  5. This should be the start of many, many more rate hikes… after all, we cannot go much lower. Too bad you will not see many wage increases any time soon… the rot is starting to set in… the titanic powers on and the iceberg awaits…

  6. I think the superannuation trick would only half work because of these factors
    1) people have seen the rates go up twice now and are wary of it going up more. Whereas before there was a lot of talk about “interest rates won’t be going up for a while yet”
    2) lot more talk about the bubble in MSM.. so one does not have to look beyond the front page of smh or Afr to hear it. Whereas before you really had to seek out past the MSM Bullshit
    3) superannuation has its own vested interests and lobbies that will put up a good scare campaign. Always back self interest.
    3) I don’t know that fhb have enough super to make a huge enough dent here. With the underemployment, crashing youth employment.. who are these fhb that have $$$$$ in super that we speak of??
    It would still work to some extent.. but really how much given the above.
    Would love to see data on average super balance of a fhb.

  7. Mean Super Balance: 2013-14 (could not find data for later years, just add 5-6% pa to update)
    Source: ASFA
    age M/F average ($000)
    25-29 16.4
    30-34 30.9
    35-39 44.9
    40-44 68.3
    45-49 93.2
    So, without funds from outside Super, this on its own will not make much of a dent on the deposit for a house in Syd/Melb.

  8. Late to this party but…

    recall ASIC is alleging Westpac didn’t take into account IO borrower’s actual declared expenses, rather used an estimate based on 2010 benchmarks. See Schedule 3, using actuals, the 7 borrowers have shortfalls between $600 and $3600 per month! As if that isn’t enough, ASIC also thinks Westpac isn’t including the additional cost of IO over the term when assessing affordability.

    http://download.asic.gov.au/media/4167716/17-048-originating-application-asic-vs-westpac.pdf

    If this gets up, i can see class actions against the banks when borrowers default based on irresponsible lending.

    Tik, tik, tik…

  9. NEW ZEALAND INITIATIVE PRAISES (LABOUR) TWYFORD’S (INFRASTRUCTURE BOND FINANCING) POLICY … KIWIBLOG

    http://www.kiwiblog.co.nz/2017/03/nz_initiative_praises_twyford_policy.html

    The NZ Initiative released:

    The New Zealand Initiative says Phil Twyford’s infrastructure bonds are a workable policy that could solve the funding problem that is choking off housing supply in New Zealand’s fastest growing cities. … read more via hyperlink above …

    … read Pavletich comment on Kiwiblog thread above …

    … Mid 2016 report …

    Editorial: Labour’s bond proposal makes sense – Business – NZ Herald News

    http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11643010

    … Late 2015 report …

    Opinion: Planning rules the cause of housing crisis … Twyford & Hartwich … NZ Herald

    http://m.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11553128

  10. Precedent has already been set in cases where falsified loan application forms have resulted in some, or all of the affected mortgage amount being cancelled. Apparently this has been occurring for years, but all settlements have been done very quietly.

    https://www.youtube.com/watch?v=ZMcf4PUyOzY

    Edit: wrong spot. should be @P13

      • Agree. Not sure what Nick Hubble has been up to lately. Seems to have gone quiet in October 2014. Perhaps much like our state politicians, perhaps they made him an offer he couldn’t refuse.

        His google plus page has a comment from a property consultant looking to locate a letter he wrote which apparently describes how to obtain the loan origination form and start the process of having the loan annulled. Apparently Port Phillip publishing has stopped distributing it. Perhaps someone has pulled out the laywers and made some threats.

        https://plus.google.com/+NickHubble?rel=author

        Someone out there must have that letter. Or know where Nick can be found. Twitter?

  11. For me the big cogs in this property bubble are Global interest rates rising and China having a credit event becoming the new Japan as Prof Michael Pettis has stated where GDP falls to 0-2% and their global buying binge ends.. Banks are raising rates mainly because global rates are rising plus investors have gone bananas so they want to reign that in because of APRA and the RBA being vocal..

    There has been quite a few “out of cycle” rate hikes in the last 6 months and I think they will continue. People are convinced there is no way the RBA will raise rates till 2018 or maybe even 2019. The Fed just raised rates and China’s PBOC raised rates the day after them, I think the RBA could be forced to raise rates this year to stay competitive and prevent capital flight.