UBank introduces 'lowest ever' home loan rate

author-avatar By on January 22, 2021
UBank introduces 'lowest ever' home loan rate

NAB-owned digital bank UBank has introduced what could be Australia's lowest advertised home loan interest rate.

For a limited time, UBank is offering a three-year fixed home loan rate of 1.75% p.a., with a comparison rate of 2.22% p.a.* for owner occupiers paying principal & interest.

Interested borrowers must apply by 26 February and settle within 90 days.

The maximum loan-to-value ratio (LVR) on the loan is 80% (i.e. a 20% deposit), which is distinct among lenders with home loans under 2% - many of the lowest rates have a maximum LVR of 60-70%. 

The new 'UHomeLoan' advertised rate represents a 20 basis point cut to the three-year fixed rate, with the home loan previously charging 1.95% p.a.

The NAB-owned lender now holds claim to what could be the lowest advertised rate home loan on the market, according to Savings.com.au's market research.

You can see how this rate stacks up to those offered by other lenders below, noting that the latest cut may be yet to appear.

The table below features home loans with some of the lowest interest rates on the market.

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%. However, the ‘Compare Home Loans’ table allows for calculations to made on variables as selected and input by the user. All products will list the LVR with the product and rate which are clearly published on the Product Provider’s web site. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. Rates correct as of . View disclaimer.

According to UBank CEO Philippa Watson, the online lender has more than halved its interest rate on its three-year owner occupier loan in a little over 18 months.

“Rates are at an all-time low. If you’ve been toying with the idea of fixing all or some of your home loan, then I encourage you to explore the most competitive rates, as you could be saving thousands," she said.

In May 2019, the advertised rate for that loan was 3.59% p.a, which UBank says has the potential to save customers up to $465 per month in interest payments on a $480,000 loan.

UBank's rate change comes amid a pick-up in activity over the past week as some lenders locked-in their first rate cuts of the year.

For example, People's Choice cut its three-year fixed packaged loan for owner occupiers by 10 basis points.

It now stands at 1.99% p.a. (3.64% p.a. comparison rate*), for those paying P&I.

Various other non-packaged investor and owner occupier loans were cut by up to 15 basis points.

Elsewhere, Newcastle Permanent cut and raised a few home loans. 

Various 'Premium Plus Package' home loans fixed for five years were raised by up to 20 basis points.

However, some four-year fixed loans were cut by up to 19 basis points.

For example, the four year fixed loan for investors now stands at 2.59% p.a. (3.96% p.a. comparison rate*).

This is a 'special offer' for borrowers with a maximum LVR of 80%.

Newcastle Permanent is notable in that borrowers can fix their home loan for up to 10 years. 


Photo by Lennon Cheng 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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Harrison is Savings.com.au's Assistant Editor. Prior to joining Savings in January 2020, he worked for some of Australia's largest comparison sites and media organisations. With a keen interest in the economy, housing policy, and personal finance, Harrison is passionate about breaking down complex financial topics for the everyday consumer.

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