The Queensland-based bank cut the rates on its Basic Home Loan for new owner occupier loans with loan-to-value ratios of (LVR) ≤60% and 60-70% and principal and interest (P&I) repayments.
The cuts and new rates are as follows:
Product | Change (%) | New rate | Comparison rate* |
Basic Variable (P&I) ≤60% LVR | -0.10 | 5.99% | 6.02% |
Basic Variable (P&I) 60-70% LVR | -0.15 | 5.99% | 6.02% |
Auswide Bank's Basic Home Loan comes with no monthly or ongoing fees and a redraw facility.
However, there's no option to fix the rate on the Basic Home Loan, and it doesn't allow for an offset account.
Tight mortgage market
Auswide Bank joins a clutch of lenders offering variable home loan rates of under 6% p.a. including unloan, Tiimely (formerly tic:toc), and Heritage Bank.
The former bank's cut comes in the same week the Reserve Bank of Australia board opted to leave the official cash rate on hold at 4.35%.
However, the latest home lending data shows mortgage arrears are rising in Australia, lifting from COVID lows of just 1% in 2022 to 1.6% in the March quarter of 2024.
Property market analyst CoreLogic said higher arrears is linked to a sharp rise in the cost of servicing home loan debt.
The average variable interest rate on an outstanding owner occupier home loan jumped from 2.86% in April 2022 to 6.39% in March 2024.
In monetary terms, this adds almost $1,600 to the monthly repayments for a borrower with $750,000 debt.
Arrears concern
CoreLogic research director Tim Lawless said the upward trend in arrears has been most influenced by non-performing loans (NPL) – those that are at least 90 days overdue for payment.
The rate of NPL arrears was at 0.93% in the March quarter, while loans overdue by between 30 and 89 days comprised 0.68% of overall loans.
As well as higher debt costs, Mr Lawless said cost of living pressures are also consuming a larger proportion of household income.
"There is also the fact that households are more sensitive to sharp adjustments in interest rates, given historically high levels of debt, most of which is housing debt," Mr Lawless said.
"Loosening labour market conditions would also be playing a role."
What's ahead?
Mr Lawless expects mortgage arrears to rise further as unemployment lifts, household savings further deplete, and economic conditions navigate "a period of weakness".
"Arrears are unlikely to experience a material 'blow out' unless labour markets weaken substantially more than forecast," he said.
Homeowners who fall behind on their repayments can take some comfort in the fact that the vast majority of mortgage-holders could clear their debts on the sale of their property.
The RBA recently estimated that only 1% of Australian residential dwellings are in negative equity (that is, the home loan used to buy a property is worth more than the property itself).
CoreLogic noted strict regulations governing how banks must measure a borrower's ability to service a home loan have helped ensure Australia's relatively low mortgage arrears, despite the high interest rate environment.
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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.
| 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 |
