Macquarie slashes interest-only home loan rates for investors

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on September 11, 2020
Macquarie slashes interest-only home loan rates for investors

Photo by Thomas Yohei on Unsplash

Macquarie Bank has slashed a wide range of interest-only investor home loans by up to 55 basis points.

On Tuesday, Macquarie enacted a wide range of interest rate cuts, including:

  • Basic Fixed Investment 1 Year IO: 55 basis point cut to 2.89% p.a. (3.30% p.a. comparison rate*)
  • Basic Fixed Investment 2 Years IO: 55 basis point cut to 2.89% p.a. (3.26% p.a. comparison rate*)

These rates are for borrowers with a maximum LVR of 80%.

A number of other loan types were cut by between 10 and 55 basis points, including investment loans with offset accounts attached.

"Now more than ever people are looking for certainty around their budgeting and expenses, especially when it comes to home loans," a Macquarie spokesperson said.

Buying an investment property or looking to refinance? The table below features home loans with some of the lowest variable interest rates on the market for investors.

Lender

Variable
More details
  • Option to add an offset for 0.10%
  • No monthly or ongoing fees
  • Unlimited redraws

Smart Booster Investor Bundle (Principal and Interest)

  • Option to add an offset for 0.10%
  • No monthly or ongoing fees
  • Unlimited redraws
Variable
More details
GET APPROVED FASTER WITH A DIGITAL APPLICATION
  • Split Loan Option
  • Unlimited additional repayments
  • Free redraw facility
GET APPROVED FASTER WITH A DIGITAL APPLICATION

Neat Variable Investment Loan (Principal and Interest) (LVR < 60%)

  • Split Loan Option
  • Unlimited additional repayments
  • Free redraw facility
Variable
More details
100% FULL OFFSET ACCOUNT
  • Free redraw facility
  • Split account option
  • Unlimited extra repayments
100% FULL OFFSET ACCOUNT

Ocean Investment (Amounts < $1m, LVR < 60%)

  • Free redraw facility
  • Split account option
  • Unlimited extra repayments

Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. All products will list the LVR with the product and rate which are clearly published on the Product Provider’s web site. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of August 7, 2022. View disclaimer.

Yesterday, the prudential regulator (APRA) released details into the value and number of home loans deferred in Australia as of July.

In a breakdown of risk profiles as a proportion of total loan deferrals, more than one in five of Macquarie's interest-only loans were deferred, tied first with Westpac and Bendigo Bank.

However, Macquarie did have the lowest number of 90%+ LVR loans in deferral out of the 20 largest banks, at just 3% of loans deferred.

Westpac's credit strategy team said there were "few surprises" in the APRA data.

"Key banks either reported or provided 3Q updates in August that reflected the July data and that will miss any further Victorian downside. August and September will prove more interesting," they said.

In total, about one in ten of Macquarie's loans were deferred, which is in-line with the wider market.

Is there a cliff coming?

A large portion of loans in Australia are funded by residential mortgage-backed securities (RMBS), which are explained in further detail here.

The amount of loans deferred can impact wholesale funding as investors adjust their appetite for risk.

Yesterday, credit ratings agency Moody's said it expects 'delinquencies' to rise in the coming months - that is loan pools that are in arrears by more than 30 days.

"Australian RMBS delinquency rates will increase for the remainder of 2020 because of the ongoing economic fallout from the coronavirus outbreak," the Moody's report said.

"Government relief measures, monetary policy easing and lender loan payment deferrals also supported borrowers over the June quarter, which contributed to lower prime RMBS delinquencies."

However, Moody's did point to a potential cliff should borrowers not start to repay their loans once deferrals end.

"As government and lender support measures expire in coming months, we expect delinquency rates to increase," its report said.

"Some borrowers on loan payment deferrals will not be able to resume full loan payments once deferral periods end.

"Deferred loans do not count as delinquent, but will do so if borrowers do not resume repayments at the end of deferral periods."

Non-banks have fewer loans in deferral

Yesterday, credit rating agency Standard & Poor's (S&P) released data into where most of the COVID-19 relief is coming from in the mortgage securities space.

In the 'prime' RMBS sector in July, it was revealed that, on average, 7.1% of major banks' securities had some form of deferral or relief in the underlying pool of mortgages.

This was as opposed to non-banks, which had 6.2% of theirs receiving some form of relief, while regional banks had 10.4% on average, representing an uptick from 8.3% in April. 

By state, Western Australia had the highest rate of delinquencies at 2.61%, followed by the Northern Territory at 2.59%.

Low-doc loans had an uptick in arrears to 6.52%, while 90-day-plus delinquencies rose to 4.38% - APRA data revealed 17% of all small business loans were deferred in July, amounting to $55 billion.




Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered. Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site. Savings.com.au, yourmortgage.com.au, yourinvestmentpropertymag.com.au, and Performance Drive are part of the Savings Media group. In the interests of full disclosure, the Savings Media Group are associated with the Firstmac Group. To read about how Savings Media Group manages potential conflicts of interest, along with how we get paid, please visit the web site links at the bottom of this page.

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Harrison is Savings.com.au's Assistant Editor. Prior to joining Savings in January 2020, he worked for some of Australia's largest comparison sites and media organisations. With a keen interest in the economy, housing policy, and personal finance, Harrison strives to deliver and edit news and guides that are engaging, thought-provoking, and simple to read.

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