Borrowers are facing increased loan rates with more than 20 mortgage lenders discreetly raising mortgage rates in the past six weeks with other major banks expected to follow.
The rate changes between the highest and lowest standard variable rate ranges from about 3.85 per cent to 6.11 per cent, this could account for nearly $300 dollars in monthly repayments on a $1 million mortgage.
The latest hikes come as lenders face profit margin pressure due to rising costs to wholesale funding at a time when lenders need to build up large capital reserves to meet new prudential rules.
The recent changes come as some banks are set to announce next month they are changing the way interest-only loans are calculated for new and existing customers.
Currently the repayments are calculated into 12 equal monthly amounts that do not vary with the number of days in a specific month. The new arrangements will be charged monthly and based on the outstanding balance on the day of calculation.
This means a borrower with a loan balance of $500,000 paying 4.5 per cent and no offset account will be paying $1726 on a 28 day month, a reduction of $149. However, repayments will rise to $1910 for a 31 day month, a rise of $35.
Loan restructuring and rising rates are a response to increased hedging and funding costs.