UBank removes LMI for 15% deposits, Athena cuts variable rates

author-avatar By on May 10, 2021
UBank removes LMI for 15% deposits, Athena cuts variable rates

UBank is making it easier to get into the property market with smaller deposits while Athena has slashed variable mortgage rates.

From today, online lender and NAB subsidiary UBank will allow owner occupiers to buy a home with a 15% deposit without needing to fork out for Lender's Mortgage Insurance (LMI).

That's down from the standard LMI cutoff of 20%. 

According to UBank, owner occupiers could save $5,000 in insurance costs on an average loan of $480,000 by saving for a $72,000 deposit (15%) instead of $96,000 (20%). 


Buying a home or looking to refinance? The table below features home loans with some of the lowest interest rates on the market for owner occupiers.

Base criteria of: a $400,000 loan amount, variable, fixed, 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.

UBank CEO Philippa Watson said the major change would mean Australians can get into the market seven months earlier than if they had to pay LMI upfront. 

“We’re passionate about helping Australians get into their own homes but we know saving for a home deposit takes an average of 4.6 years, rising to over eight years for Sydney-siders," Ms Watson said.

“By only requiring a 15% deposit and waiving the need for LMI, UBank can help shave nearly seven months off the process."

Related: Gateway Bank to let customers make separate monthly LMI repayments

UBank loans available with this offer include a variable rate of 2.49% p.a. (2.49% p.a. comparison rate*), or a three-year fixed rate of 2.05% p.a. (2.41% p.a. comparison rate*) for owner occupiers making principal and interest (P&I) repayments.

Ms Watson said LMI, which can run into the tens of thousands, is an additional expense borrowers can do without.

"We know the appetite for home ownership is continuing to grow, with 56% of Aussies who do not yet own a home excited about the prospect of owning one, up 13% since July last year," she said. 

“But saving for a deposit can make the great Australian dream seem out of reach.

“LMI can add tens of thousands to a borrower’s loan. Here at UBank, we believe it’s an extra expense our customers can do without."

Athena drops variable rates by up to 20 basis points

Online lender Athena has cut interest rates on a number of its home loans for both owner occupiers and investors. 

Athena rate cuts for owner occupiers

  • The Celebrate variable P&I home loan for borrowers with 60% LVR has been cut by 20 basis points to 1.99% p.a. (1.99% p.a. comparison rate*). 
  • The Evaporate variable P&I home loan for borrowers with 60-70% LVR has been cut by 15 basis points to a new low 2.09% p.a. (2.02% p.a. comparison rate*). 
  • The Liberate variable P&I home loan for borrowers with 70-80% LVR has been cut by 10 basis points to 2.19% p.a. (2.08% p.a. comparison rate*).

Athena rate cuts for investors

  • The Celebrate variable P&I home loan for borrowers with 60% LVR has been cut by 15 basis points to 2.39% p.a. (2.39% p.a. comparison rate*).
  • The Evaporate variable P&I home loan for borrowers with 60-70% LVR has been cut by 10 basis points to 2.49% p.a. (2.43% p.a. comparison rate*).
  • The Liberate variable P&I home loan for borrowers with 70-80% LVR has been cut by 5 basis points to 2.59% p.a. (2.48% p.a. comparison rate*).
  • Investors making interest only (IO) repayments with 60% LVR have received a 15 basis point cut to 2.69% p.a. (2.50% p.a. comparison rate*). 

Government announces new home buying measures 

These changes come after the Federal Government announced a range of new measures to help Australians buy their first home sooner as part of the upcoming 2021-22 Budget, to be unveiled on Tuesday.

Among the measures are the Family Home Guarantee, which will allow 10,0000 single parents every year over four years to purchase a home with a 2% deposit from July.

The First Home Loan Deposit Scheme, now called the 'New Home Guarantee' will be expanded for a second year, providing an additional 10,000 places in 2021-22.

Under the scheme, first time buyers can purchase a newly built home or build a new home with a 5% deposit.

The maximum amount of voluntary contributions that can be released under the First Home Super Saver Scheme will be increased from $30,000 to $50,000.


Photo by DocuSign on Unsplash

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): Great Southern Bank, 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.
  • If you click on a product link and you are referred to a Product or Service Provider’s web page, it is highly likely that a commercial relationship exists between that Product or Service Provider and Savings.com.au

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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Emma Duffy joined Savings.com.au as a Finance Journalist in 2019 after spending a year as the editor of The Real Estate Conversation. She's passionate about empowering people to make smart financial decisions and improve the financial literacy of Australians by translating complex finance topics into understandable, relatable content.

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