Introductory rates can make a loan product seem much more appealing. Usually lower than the advertised rate, intro rates can be attractive for both refinancers and home buyers, but are they worth it?
What is an introductory home loan?
An introductory home loan means a discounted interest rate for a set period of time, anything from six months to a few years. The rate is usually substantially lower than the equivalent ongoing rate, and will often also be lower than many of the other products available on the market.
This lowers your minimum repayments for the introductory period which could help you gradually settle in to your new mortgage. Alternatively you might take the opportunity to make over payments while the interest rate is low to bring down the outstanding balance that will be subject to a higher rate once the introductory period is up.
The interest rate the introductory loan switches to at the end of the introductory period is known as the 'ongoing rate' or 'revert rate' which you may have heard of in relation to fixed-rate loans.
See also: Fixed vs variable home loans: What to consider
Buying a home or looking to refinance? The table below features a selection of the variable interest rates on the market right now for owner occupiers.
| Lender | Home Loan | Interest Rate | Comparison Rate* | Monthly Repayment | Repayment type | Rate Type | Offset | Redraw | Ongoing Fees | Upfront Fees | Max LVR | Lump Sum Repayment | Extra Repayments | Split Loan Option | Tags | Features | Link | Compare | Promoted Product | Disclosure |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
5.94% p.a. | 5.98% p.a. | $2,978 | Principal & Interest | Variable | $0 | $530 | 90% |
| Promoted | Disclosure | ||||||||||
5.89% p.a. | 5.80% p.a. | $2,962 | Principal & Interest | Variable | $0 | $0 | 80% |
| Promoted | Disclosure | ||||||||||
5.99% p.a. | 6.02% p.a. | $2,995 | Principal & Interest | Fixed | $0 | $0 | 60% |
| Promoted | Disclosure | ||||||||||
5.93% p.a. | 5.93% p.a. | $2,975 | Principal & Interest | Variable | $0 | $395 | 70% | Disclosure |
What's the difference between an introductory and fixed rate?
If you're new to home loans this all might sound a little bit like fixed rates. Introductory rates however are generally variable, meaning your rate could fluctuate in line with the RBA cash rate, although it should remain lower than the ongoing rate. Introductory rates are also only available at the start of the loan term, whereas you generally can fix at any time.
What to consider before taking out an introductory home loan
Introductory home loans may sound great but before you take one out there some things you should consider:
1. The revert rate
When the introductory period ends the interest rate will generally revert to a higher ongoing rate which may be considerably higher than the intro rate and less competitive compared to the rest of the market. A suddenly significantly higher rate could bump up your monthly repayments, putting pressure on your finances if you're unprepared. You should know what the rate will revert to prior to taking out the intro loan, as if it's considerably higher, it may not be cheaper for you over the life of the loan, compared to other products on the market.
2. The comparison rate
The comparison rate gives you an idea the true cost of the loan by incorporating the interest rate, revert rate and the various fees to come up with a more comprehensive percentage figure. Introductory home loans can come with hidden fees or fees not normally attached to regular home loans. The comparison rate can signify the true cost of these fees, as well as the interest rate you'll be paying for the large majority of the loan, rather than just the intro rate.
3. Features
Features like redraw and offset facilities can make paying off your loan easier, allowing you to make extra repayments or offsetting the amount of interest you'll pay and reducing the life of your loan. Some introductory home loans won't allow for these features or will restrict the number of extra repayments you can make due to the lower interest rate you're paying.
Pros and cons of an introductory home loan
Pros
Introductory home loans can have a number of benefits:
- Lower interest rates: Introductory home loans typically boast some of the most competitive interest rates on the market.
- Introduction to loan repayments: If you're a first home buyer, making the switch from rental payments to mortgage repayments can be a massive jump. Having lower repayments in the first year can make this transition smoother.
- Take advantage of multiple lender's intro rates: As introductory rates are an incentive to refinance, you might be able to pay the introductory rate at one lender for a couple of years, then when the period is up switch over to another lender and pay the introductory rate there. However, there are costs to refinancing - you may have to pay LMI again - so you should be crunching the numbers to work out if this strategy is really worth it.
- Improve initial cash flow: Buying a house involves a lot of upfront costs like stamp duty, home loan application fees, and legal fees to name a few. Furthermore, if you're moving into a new place you might want to spend some money to make the place your own. Lower repayments can free up cash to handle both these expenses.
Cons
There can also be several downsides to introductory rates:
- High ongoing rate: Introductory home loans can revert to substantially higher rates at the end of the intro period, possibly costing you far more over the life of your loan than a regular home loan with a lower ongoing rate might have.
- Restricted features: Given their low rate, lenders might not have as many features available on introductory home loans.
- Switch fees: When your intro period ends it's possible to switch to a different product with the same lender which carries a rate lower than the introductory loan's revert rate. However this doesn't always come for free and switch fees can often be applied. If you switch to a different lender, the refinancing costs can also be substantial.
Other ways to save on your home loan
An introductory home loan isn't the only way you can save money and reduce the life of your loan. Other ways you can save on your loan include:
1. Negotiating with your current lender
In the modern competitive home loan market lenders are doing everything they can to hold on to customers. It could be worth talking to your lender to see if they will offer you a lower interest rate - you might find threatening to take your business elsewhere is sometimes enough to shave a few percentage points off your rate.
2. Refinancing to another lender
If your lender doesn't want to come to the table, refinancing to a different lender could be another good option. You could refinance to another introductory home loan or simply to another loan with a low rate. Make sure the costs of refinancing don't outweigh the savings you'll gain from refinancing.
3. Using offset accounts
An offset account is like a savings account linked to your home loan. The money in your offset account is 'offset' against your home loan debt when interest is calculated. This reduces the amount of interest charged on your loan, which could potentially reduce the length of your loan and save you thousands.
4. Opting for fixed-rate home loans
Fixed rates can sometimes cheaper than variable rates. However, there's also the risk that during your fixed term variable rates go down and you miss out on lower repayments.
Savings.com.au's two cents
Introductory home loans can be a great way to start your home loan journey, potentially allowing for lower repayments in the first year or two of your loan by having a very competitive interest rate.
Before you enter into an introductory home loan you should know what the rate will revert to at the end of your intro period, and consider speaking with a financial adviser before making any major decisions.
This article was initially written by Alex Brewster in 2020 and last updated in 2025