When the Reserve Bank's cash rate hit a historic low of 0.10% in November 2020, many banks and lenders responded by slashing home loan rates to their lowest ever. The major banks were some of the first responders, sharply decreasing rates particularly on three and four-year fixed home loans. Smaller lenders also cut sharply.
However, funding costs to banks and lenders are increasing - and so are home loan rates. The Reserve Bank increasing the cash rate, starting in May 2022, also pushed a lot of home loan rates up.
In Savings.com.au's market research and on its database, there are now no home loans with an advertised rate under 2%. Luckily there are still a handful of lenders offering competitive home loan deals.
- Any owner Occupier Home Loans Under 2%?
- Any investor Home Loans Under 2%
- Why Does the Comparison Rate Matter?
- Full List of Lenders
Are there any home loans under 2%?
In Savings.com.au's market research there were at one stage more than 50 lenders with a home loan under 2%, including larger banks, challenger banks, non-bank lenders, and customer-owned banks. The lowest advertised rate seen was 1.59% p.a. These home loans were available across fixed or variable terms with a variety of loan-to-value ratios (LVRs). Owner occupiers received the lion's share of home loan rates starting with a 1.
Regardless of the advertised interest rate, be sure to also compare features of the home loan, including whether it comes with an offset account or redraw facility, and if it's a packaged home loan.
Also note the varying conditions between each product as well as the different comparison rates. This will be indicative of the extra fees you have to pay, such as a loan establishment fee, monthly or yearly account keeping fees and so on.
The pendulum is swinging back to variable home loans, clawing back market share where at one stage nearly half of all new home loans were fixed. Variable home loans offer flexibility, often with the ability to pay unlimited extra amounts into the home loan, while also coming with extra features such as offset accounts.
| Lender | Home Loan | Interest Rate | Comparison Rate* | Monthly Repayment | Repayment type | Rate Type | Offset | Redraw | Ongoing Fees | Upfront Fees | LVR | Lump Sum Repayment | Additional Repayments | Split Loan Option | Tags | Features | Link | Compare |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
6.04% p.a. | 6.06% p.a. | $2,408 | Principal & Interest | Variable | $0 | $530 | 70% | Featured Online ExclusiveUp To $4K Cashback |
| |||||||||
5.99% p.a. | 5.90% p.a. | $2,396 | Principal & Interest | Variable | $0 | $0 | 80% | Featured Apply In Minutes |
| |||||||||
6.14% p.a. | 6.16% p.a. | $2,434 | Principal & Interest | Variable | $0 | $250 | 60% | Featured Unlimited Redraws |
|
Investor home loans under 2%
Investment home loan interest rates tend to track a bit higher than mortgages for owner occupiers. Below is a selection of some of the most competitive home loans in the investment space.
| Lender | Home Loan | Interest Rate | Comparison Rate* | Monthly Repayment | Repayment type | Rate Type | Offset | Redraw | Ongoing Fees | Upfront Fees | LVR | Lump Sum Repayment | Additional Repayments | Split Loan Option | Tags | Features | Link | Compare |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
6.54% p.a. | 6.54% p.a. | $2,539 | Principal & Interest | Variable | $0 | $0 | 60% | |||||||||||
6.34% p.a. | 6.36% p.a. | $2,486 | Principal & Interest | Variable | $0 | $350 | 60% |
| ||||||||||
6.29% p.a. | 6.32% p.a. | $2,473 | Principal & Interest | Variable | $0 | $299 | 80% |
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.
For fixed loans, 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.
The comparison rate also 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. By some measurements the median house price in Australia's capital cities has surpassed $1 million, so this figure might not mean much to you.
Lenders with home loans under 2%
Below is a list of lenders that have previously offered home loans with advertised rates below the 2% mark.
ANZ
CommBank
Westpac
NAB
86 400
Adelaide Bank
AMP Bank
Aussie
Bank Australia
Bank First
Bank of Melbourne
Bank of Queensland (BOQ)
BankSA
Bankwest
BankVic
BCU
Bendigo Bank
Citi
Credit Union SA
Great Southern Bank (formerly CUA)
Endeavour Mutual
Freedom Lend
G&C Mutual
Greater Bank
Homeloans.com.au
Homestar Finance
HSBC
Hume Bank
Illawarra Credit Union
IMB Bank
ING
LCU (Laboratories Credit Union)
loans.com.au
ME Bank
Mortgage House
MOVE Bank
Nano
Newcastle Permanent
Northern Inland Credit Union
P&N Bank
Pacific Mortgage Group
People's Choice Credit Union
QBANK
Queensland Country Bank
RACQ Bank
RAMS
Reduce Home Loans
St.George Bank
South West Slopes Credit Union
Suncorp Bank
Sydney Mutual
Teachers Mutual Bank
Tiimely
UBank
Virgin Money
WLTH
Yard
First published 26 August 2020, last updated 16 December 2022.
Photo by Jonny_Joka on Pixabay
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