Is the pendulum swinging back to variable rate home loans?

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on October 08, 2021
Is the pendulum swinging back to variable rate home loans?

In the past few days, UBank, MyState, Bank Australia and Illawarra Credit Union have all cut interest rates on variable rate home loans.

The four lenders join Westpac, Bank of Us, Teachers Mutual, Great Southern Bank and Qudos Bank in the variable-rate cutting chorus in recent weeks.

In March 2020, fixed rate loans made up just 13% of the value of new lending, while recent ABS data shows they now make up nearly half.

This was off the back of record low interest rates, and low-cost Reserve Bank funding handed to banks over a period of three years, which one lending executive said helped fuel the latest housing boom.


On Wednesday UBank made changes to its two 'UHomeLoan' variable-rate products for owner occupiers, with rates slightly different depending on the loan-to-value ratio, or LVR:

  • 80% LVR: 15 basis point cut to 2.19% p.a. (2.19% p.a. comparison rate*)
  • 85% LVR: 15 basis point cut to 2.34% p.a. (2.34% p.a. comparison rate*)

In August, UBank also lowered variable rates for investors by up to 19 basis points.

UBank is one of the few lenders that waives lenders mortgage insurance (LMI) for borrowers with a 15% deposit, which the NAB-owned outfit says could save borrowers $5,000 in LMI costs on the 'average' home loan of $480,000.

On Thursday, Bank Australia also cut a swathe of interest rates across its suite of 'Basic' variable-rate home loan products. Some of the more noteworthy changes include:

  • Basic 60%: 20 basis point cut to 2.35% p.a. (2.39% p.a. comparison rate*)
  • Basic 80%: 20 basis point cut to 2.50% p.a. (2.54% p.a. comparison rate*)
  • Inv Basic 60%: 10 basis point cut to 2.65% p.a. (2.69% p.a. comparison rate*)
  • Inv Basic 80%: 10 basis point cut to 2.80% p.a (2.84% p.a. comparison rate*)

Bank Australia's 80% LVR loan for owner occupiers also applies to Government-guaranteed loans for first home buyers with a 5% deposit.

On Monday, MyState Bank also decreased rates on various variable-rate home loans for investors. Some key changes include:

  • Investment 60%: 10 basis point cut to 2.44% p.a. (2.50% p.a. comparison rate*)
  • Investment 80%: 10 basis point cut to 2.54% p.a. (2.60% p.a. comparison rate*)

These are special offers, meaning they could be withdrawn at any time.

Meanwhile, on Friday Illawarra Credit Union cut its owner occupier variable-rate 'The Works Package' home loan by 75 basis points for new borrowers paying interest-only.  

The rate is now 2.50% p.a. (3.01% p.a. comparison rate*).

'The Works Package' includes a 100% offset account, redraw facility, credit card, and the option to split the loan between fixed and variable rates.


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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

Variable
More details
UNLIMITED REDRAWSSPECIAL OFFER
  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
UNLIMITED REDRAWSSPECIAL OFFER

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
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
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES
  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
Variable
More details
NSW/VIC/SA METRO & INNER REGIONAL AREAS$5000 CASHBACK. T&Cs APPLY.
  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
NSW/VIC/SA METRO & INNER REGIONAL AREAS$5000 CASHBACK. T&Cs APPLY.

Variable Home Loan (Principal and Interest)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services

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 May 29, 2022. View disclaimer.


Image by 3D Animation Production Company on Pixabay

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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