Low new mortgage rate becomes higher over time

I have an IO mortgage with CUA, taken out in July 2015. The rate was good to start but CUA has bumped it up, to 4.67%. A friend is looking at CUA, and was offered 4.14% or so. There was no mention of a honeymoon rate. It seems that CUA may be getting people to apply with a low rate and then increasing it over time.

Is this correct, and does anyone know of other lenders doing this? TIA.

 

Heaps doing it. Often cheaper rates for new customers compared to existing.

 

If it's an investment loan it's probably had a couple of rate hikes outside the RBA. I don't know what CUA has done but most banks increased IP rates and then later increase variable rates (so two increases in a short time).

Your friend might be taking out a ppor loan which should have a lower rate than investment.

Cheers

Jamie

 

Thanks for the above advice. I was unaware that the increase as I described was so widespread. My friend June was looking to refinance an IP mortgage, currently 5.67%, which is 100 basis points more than I am paying at present. Even if the new mortgage is stepped up over time she will still be in front, and will recover her exit fees within a few months. Given the higher lending requirements from late 2015, I would expect higher IP rates compared to those for a PPOR. Now that the higher lending requirements have been bedded down, will the IP-PPOR rate gap remain more or less the same?


When looking for a new lender I saw that one lender offered about 50 basis points if I used the IP and my PPOR as security. Are you suggesting that refinancing by getting a mortgage on the PPOR for the IP would on balance lead to a lower rate? This can only be done once, and I'm not keen on cross-collateralisation. An easy solution is elusive.


We are both after a good rate, IO and 100% offset, nothing else. The one I’m looking at seems best.

 

It's not worth x-coll for a low rate - there are low rates out there with out it. May not AS low, but better when you look at the big picture and what you're actually getting for the small extra.

 

There's options out there which are comparable and *don't* require you to sell your soul via cross coll - I'd rather not have my lending with an institution which tries to tie me up with a bait offer.

 

I know that most of the brokers here rant about x-coll to save the $$. Can any broker be able to get 3.99% for both IP and PPOR without x-coll? Evidence pls.. not ranting..

 

Unfortunately its common practice for new borrowers to get cheaper rates than existing customers. Most lenders in the market place do this to some degree, with some particularly bad (BW come to mind).

It partly explains the importance of reviewing mortgages over time and finding a more suitable lender than 'flash rate of the week' - over a few month there'll likely be a better deal. Transition costs ($ and admin costs) generally mean its better to find suitable options for the medium/longer term if possible.

 

Sure - we can write 3.99% 3 year fixed for both PPOR and IP's. No cross coll required at all.

 

The cost saving is quite signicant when u have >$2.5 millions loan. 0.1% off translated to $2500/year. Average difference is about 0.4-0.5% hence $10k/year. Not a new borrower!

Corey, I thought that most brokers rants about fixed rates?? flexibility, penalty cost, crystal ball on future rates, trying to beat banks etc etc.

 

God of money.

That's a good one.

 

Sure you can, but why would you want to?
Pretty sure the interest rate doesn't even feature in the top 5 important parts of getting a loan.

 

What you say is true... this is why going with a lender should never be rate driven.

 

Who do you have this with may we ask? Im sure we can find some problem with it that you haven't thought about yet. Most likely is unsecure funding lines in time of market volatility and or bait and switch over time ala the OP

 

Of course easily obtain for fixed rate and you can even match with CBA

Home Package Plus Home Loan | Suncorp Bank

CBA Update - Fixed Home Loan Rate - Connective News