Want a competitive home loan? You might have to fix in this environment

author-avatar By
on December 11, 2020
Want a competitive home loan? You might have to fix in this environment

Freedom Lend, Illawarra Credit Union, AMP and others managed to cut rates in the past week, but mainly for borrowers willing to fix on packaged loans.

Freedom Lend made quite a few changes, including cuts by up to 50 basis points for its fixed loans

For example, the 'Freedom Fixed' loan paying principal & interest (P&I) fixed for three years is now 2.24% p.a. (2.44% p.a. comparison rate*).

This is for borrowers with 80% LVR, i.e. 20% deposits. A 95% LVR loan is also available.

In contrast, Freedom Lend cut a couple of variable loans only by between 5 and 10 basis points.

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

Lender

Variable
More details
  • Min 30% deposit
  • No monthly or ongoing fees, add 0.10% for offset
  • Unlimited redraws

Variable Home Loan (LVR < 70%)

  • Min 30% deposit
  • No monthly or ongoing fees, add 0.10% for offset
  • Unlimited redraws
Variable
More details
REFINANCE ONLY
  • A low-rate variable home loan from a 100% online lender. Backed by the Commonwealth Bank.
REFINANCE ONLY

Variable Rate Home Loan – Refinance Only

  • A low-rate variable home loan from a 100% online lender. Backed by the Commonwealth Bank.
Variable
More details
AN EASY DIGITAL APPLICATION
  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
AN EASY DIGITAL APPLICATION

Neat Variable Home Loan (Principal and Interest) (LVR < 60%)

  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
Variable
More details
NO ONGOING FEES
  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
NO ONGOING FEES

Yard PAYG Home Loan (Principal and Interest) LVR ≤ 80%

  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster

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 be 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. *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. Rates correct as of August 20, 2022. View disclaimer.

Illawarra Credit Union also cut a wide variety of home loans, most notably its fixed 'The Works' packaged loans.

The Works packaged loan fixed for one year paying P&I was cut by 45 basis points down to 2.34% p.a. (3.00% p.a. comparison rate*).

AMP was another to cut rates on packaged loans in the past week.

For example, the 'Professional Package' series was cut by up to 30 basis points for investors.

Paying P&I, the two year fixed package rate is now 2.49% p.a. (3.76% p.a. comparison rate*).

That said, AMP did introduce some Professional Package variable loans for owner-occupiers, aimed at refinancers with the equivalent of 40% deposits (60% LVR).

Where to find competitive variable rates

You could look at the table above to see some of the more competitive variable offers in the market at the moment.

Upwards of 35 lenders have home loans below the 2.00% p.a. advertised rate threshold these days, yet only a handful are for variable home loans.

The big four, for example, introduced sub-2% home loans only for packaged loans, fixed for four years, and generally speaking, lenders laid a massive stinker for borrowers following the Reserve Bank's latest cash rate cut.

In the past week, Reliance Bank and Credit Union SA did manage to either introduce or cut some variable loans, but only by up to 10 basis points.

For example, Reliance Bank cut its 'All in One' variable home loan for owner-occupiers paying P&I, though it's a two-year intro rate offered as a 'discount'.

It was cut by just 5 basis points down to 2.85% p.a. (4.19% p.a. comparison rate*).

Meanwhile, Credit Union SA introduced a couple new variable loans.

One is a variable packaged loan for first home buyers, which features an interest rate of 2.99% p.a. (3.41% p.a. comparison rate*).

As always, check the lenders' websites to learn about the conditions and 'discount offer' periods of each 'special offer' home loan.

Thus far, in the 'rate war', many lenders have been most willing to introduce their most competitive loans in the fixed, packaged loan space.

While fixed home loans can provide repayment certainty, which could be crucial during a recession, they have their downsides as well.

Most notably, rates are already feasibly at their lowest for the next few years, and breaking out of a fixed loan early could cost thousands.

They can also be more restrictive in how many early repayments you can make and so on.

Meanwhile, packaged loans bundle up credit cards and other products you might not need for extra fees, which is often reflected in the comparison rate.


Photo by Sincerely Media 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. 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. Savings.com.au, yourmortgage.com.au, yourinvestmentpropertymag.com.au, and Performance Drive are part of the Savings Media group. In the interests of full disclosure, the Savings Media Group are associated with the Firstmac Group. To read about how Savings Media Group manages potential conflicts of interest, along with how we get paid, please visit the web site links at the bottom of this page.

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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 strives to deliver and edit news and guides that are engaging, thought-provoking, and simple to read.

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