Challenger lenders edge closer to 1% fixed home loans

author-avatar By on April 09, 2020
Challenger lenders edge closer to 1% fixed home loans

Photo by Erik Dungan on Unsplash

No lender has taken the 1% jump yet, but several in the past week have cut home loans to rates as low as 2.09% p.a.

Major banks and the big four got a lot of the accolades in the past two weeks, with ING, ANZ, NAB, Westpac and CommBank all cutting fixed rates to the low-2% p.a. range.

But in the past week it was the smaller lenders' time to shine, with institutions such as Freedom Lend, Unibank, UBank and others making significant home loan rate cuts. 

Once again, fixed home loans got most of the love as lenders look to secure customers amid the coronavirus crisis.

Many also made deep cuts to interest-only (IO) products, as opposed to principal and interest (P&I) - the considerations to make when switching to IO can be found here.

The new fixed rate offers on the market compare favourably with some of the lowest variable rates available.

Base criteria of: a $400,000 loan amount, variable, principal and interest (P&I) owner-occupied home loans with an LVR (loan-to-value) ratio of at least 80%. If products listed have an LVR <80%, they will be clearly identified in the product name along with the specific LVR. Monthly repayments were calculated based on the selected products’ advertised rates, applied to a $400,000 loan with a 30-year loan term.

Freedom Lend

Freedom Lend cut its 'Freedom Fixed P&I' loan, fixed for two years at 80% LVR by 25 basis points.

That brings its advertised rate down to 2.09% p.a. (2.68% p.a. comparison rate*). 

This is advertised as a 'Special Offer', meaning the special rate can be withdrawn at any time.

Unibank

Unibank made a 52 basis point cut to its two and three year fixed home loans for owner occupiers down to an advertised rate of 2.14% p.a.

The comparison rate* for the two-year loan is 4.01% p.a., and for three years its 3.83% p.a.

Investors also got some love, with Unibank also cutting by 52 basis points on two and three year fixed loans down to 2.29% p.a. (4.04% p.a. for two years, 3.87% p.a. for three years comparison rates*)

Beyond Bank

Beyond Bank cut its 'Total Home Loan Package' fixed 'rate for three years by 50 basis points, down to 2.29% p.a. (3.81% p.a. comparison rate*)

This is also a 'special offer', and can be withdrawn at any time.

IMB

IMB made cuts to its owner occupier loans paying P&I for two and three years up to a maximum LVR of 90%:

  • The one year fixed rate saw a 45 basis point cut down to 2.29% p.a. (3.19% p.a. comparison rate*)
  • The two years' fixed rate saw a 40 basis point cut also down to 2.29% p.a. (3.12% p.a. comparison rate*)

Queensland Country Bank

As a special offer, Queensland Country Bank cut its two-year package home loan by 20 basis points down to 2.29% p.a. (3.84% p.a. comparison rate*).

UBank

UBank made quite a few cuts to its fixed home loans, with the lowest advertised rates attached to its one and three year fixed home loans, paying P&I.

The cuts were:

  • UHomeLoan Fixed P&I 1 Year: 45 basis point cut to 2.29% p.a. (3.12% p.a. comparison rate*)
  • UHomeLoanFixed P&I 3 Years: 40 basis point cut to 2.29% p.a. (2.90% p.a. comparison rate*)

These home loans have a 20% minimum deposit requirement.

Greater Bank

Greater Bank made a raft of cuts to its fixed products.

Most noteworthy was a 40 basis point cut to the 'Great Rate' product, fixed for one year at a special rate of 2.39% p.a. (3.56% p.a. comparison rate*).

The 'Ultimate' home loan fixed for one year also saw a 40 basis point cut to 2.39% p.a. (3.78% p.a. comparison rate*).

The main difference between the 'Ultimate' and 'Great Rate' products is that the Ultimate products come with an offset account.

These home loans are for a maximum LVR of 90%, paying P&I - interest-only loans attract a 10 basis point premium over their P&I counterparts.


Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:

  • The big four banks are: ANZ, CBA, NAB and Westpac
  • The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2020. They are (in descending order): Credit Union Australia, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
  • The larger non-bank lenders are those who (in 2020) has more than $9 billion in Australian funded loans and advances. These groups are: Resimac, Pepper, Liberty and Firstmac.

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.

In the interests of full disclosure, Savings.com.au, Performance Drive and Loans.com.au are part of the Firstmac Group. To read about how Savings.com.au manages potential conflicts of interest, along with how we get paid, please click through onto the web site links.

*Comparison rate is based on a loan of $150,000 over a term of 25 years. Please note the comparison rate only applies to the examples given. Different loan amounts and terms will result in different comparison rates. Costs such as redraw fees and costs savings, such as fee waivers, are not included in the comparison rate but may influence the cost of the loan.

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author-avatar
Harrison joined Savings in 2020. He is an experienced journalist, with previous stints at News Corp and financial comparison site Canstar. With a keen interest in personal finance, Harrison is passionate about helping consumers make more informed financial decisions.

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