ME Bank has launched a special discount offer to help first home buyers enter the market.
The lender is offering eligible first home buyers access to a 25% discount on Lenders Mortgage Insurance (LMI) and has also cut variable rates by up to 182 basis points.
The rate cuts on the Flexible Home Loan, for those making Principal and Interest (P&I) repayments are:
- 173 basis point cut to 2.58% p.a. (2.60% p.a comparison rate) for borrowers with an 80% or less Loan to Value Ratio (LVR)
- 182 basis point cut to 2.79% p.a. (2.81% p.a comparison rate) for borrowers with a 80-90% LVR
- 102 basis point cut to 3.59% p.a. (3.61% p.a comparison rate) for borrowers with a 90% or higher LVR
Borrowers are required to pay LMI when they have a deposit less than 20% of the property's value they wish to purchase, and can cost thousands of dollars.
Looking to compare low-rate, variable home loans? Below are a handful of low-rate loans in the market.
Product Features Monthly repayments:
$1,476 Advertised Comparison Product Features Base criteria of: a $400,000 loan amount, variable, principal and interest (P&I) 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. The product and rate must be clearly published on the Product Provider’s web site. Monthly repayments were calculated based on the selected products’ advertised rates, applied to a $400,000 loan with a 30-year loan term.
Smart Booster Home Loan
Monthly repayments: $1,476
Base criteria of: a $400,000 loan amount, variable, principal and interest (P&I) 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. The product and rate must be clearly published on the Product Provider’s web site. Monthly repayments were calculated based on the selected products’ advertised rates, applied to a $400,000 loan with a 30-year loan term.
ME General Manager, Home Lending Andrew Bartolo said the offer will address housing affordability and give first home buyers a leg up when they need it most.
“First Home Buyers told us they care most about lower LMI, lower deposit, low variable rates and no ongoing fees. We’ve delivered exactly that," Mr Bartolo said.
“We’ve combined our lowest-ever variable rate, no ongoing fees and our fully featured home loan product with an innovative LMI discount to help First Home Buyers smash through the deposit hurdle and reach their dream of home ownership.
“With COVID-19 impacting house prices and many government grants and incentives available, now could be an ideal time for First Home Buyers to finally get into the market.”
The offer is available to first home buyers for the purposes of buying or constructing their first residential dwelling solely for owner-occupation.
Applicants can own or have previously owned a residential investment property and need at least a 5% deposit to qualify for both the LMI and variable rate discount.
The ME Bank offer is valid for applications submitted from today to November 20 that settle by 26 February 2021.
The loan comes with offset and redraw facilities and the ability to make extra repayments.
According to the Australian Prudential Regulation Authority (APRA), 95% LVR loans make up 5% of the overall loan book in Australia, but account for 8% of all loan deferrals.
ME Bank isn't the first lender to offer discounted LMI, with St George offering LMI for just $1 to first home buyers.
How much does LMI cost?
According to Genworth, a borrower looking to purchase a $600,000 home with a 95% LVR would pay an estimated $25,707 in LMI.
This would drop to $13,176 with an LVR of 90% LVR and $6,630 with an 85% LVR.
Check out the table below for a further breakdown of potential LVR costs for various property values.
|Estimated property value||95% LVR||90% LVR||85% LVR|
Source: Genworth LMI premium estimator. Prices including GST but excluding stamp duty. Based on a loan term up to 30 years
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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