A number of lenders have broken the 2% barrier, now offering home loans with advertised interest rates starting with a '1', but how do they stack up?
Who offers home loans under 2%?
According to Savings.com.au’s market research, there are now at least 30 lenders offering home loans with advertised rates below 2.00% p.a. Below are a handful of home loans starting with a 1 for owner-occupiers.
Note that many of these are ‘special offers’ which may be withdrawn at any time or are only available until a set date. Many lenders now also offer more than one sub-2% home loan. Also note the varying conditions between each product as well as the different comparison rates.
CommBank, Westpac, and NAB home loans under 2%
Three of the big four banks were the first to cut home loans after November's RBA rate decision. As it stands, ANZ does not currently offer a home loan under 2%, whereas CommBank, Westpac, and NAB do. In many cases you'll need to be willing to fix for four years on a packaged home loan.
Variable home loans under 2%
You may have noticed that a lot of the hottest rate cuts are going to fixed home loans. The pandemic and subsequent recession has led to many lenders wanting to fix customers to home loans for some cashflow certainty. However, those looking at variable rates do not necessarily miss out.
Home loans under 2% for smaller deposits
Many of the home loans with the lowest advertised rates are generally for borrowers with 20% or greater deposits. If you have a smaller deposit, say 10% (i.e. 90% LVR) your options could be limited. However, there are a handful of lenders available - with some even offering home loans under 2% with as little as 5% deposit - as seen below.
Why does the comparison rate matter?
It’s all well and good to have a home loan with an advertised rate of less than 2.00% p.a. However, arguably the more important figure to look at is the comparison rate. While the advertised rate determines your base monthly repayment, it doesn’t take into account a few other things, which is where the comparison rate steps in.
The comparison rate accounts for yearly fees, monthly fees, package fees, settlement fees, exit fees and a myriad of other fees, such as for offset accounts and so on. The comparison rate, in Australia, is also based on a $150,000 loan for a 25-year term, in many circumstances. Considering in the capital cities the median dwelling value is over $500,000, this could frankly mean two fifths of bugger-all to you.
Comparison rates also take into account revert rates, which explains why many fixed-rate and introductory-rate loans tend to have a much higher comparison rate relative to the advertised rate.
Lenders with home loans under 2%
Bank of Melbourne
Illawarra Credit Union
Pacific Mortgage Group
People's Choice Credit Union
Reduce Home Loans
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.
*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.
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