Is the pendulum swinging back to variable rate home loans?

author-avatar By 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These are special offers, meaning they could be withdrawn at any time.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
Advertised rate Comparison rate Monthly repayment Rate TypeOffsetRedrawOngoing FeeUpfront FeesLVRLump Sum RepaymentAdditional RepaymentsPre-approval
VariableMore details
LIMITED TIME 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%
LIMITED TIME 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%
VariableMore details
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
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
VariableMore details
REFINANCE IN MINUTES, NOT WEEKS

Nano Home Loans Variable Owner Occupied, Principal and Interest (Refinance Only)

  • Refinance only. Fast online application
  • No Nano fees. Free 100% offset sub account
  • Mobile app, Visa debit card & instant payments
REFINANCE IN MINUTES, NOT WEEKS

Nano Home Loans Variable Owner Occupied, Principal and Interest (Refinance Only)

  • Refinance only. Fast online application
  • No Nano fees. Free 100% offset sub account
  • Mobile app, Visa debit card & instant payments
VariableMore details
YOU COULD WIN $100k TO PAY DOWN YOUR LOAN*

Owner Occupier Accelerates - Celebrate (LVR < 60%) (Principal and Interest)

  • For a chance to win $100K towards your home loan, apply with Athena before Oct 31 & be approved by Dec 15
  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
YOU COULD WIN $100k TO PAY DOWN YOUR LOAN*

Owner Occupier Accelerates - Celebrate (LVR < 60%) (Principal and Interest)

  • For a chance to win $100K towards your home loan, apply with Athena before Oct 31 & be approved by Dec 15
  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
VariableMore details
AN EASY ONLINE APPLICATION

Yard Home Loan (Principal and Interest) (Special) (LVR < 70%)

  • Unlimited additional repayments
  • Unlimited free redraws
  • Optional 100% offset can be added for $120 p.a.^
AN EASY ONLINE APPLICATION

Yard Home Loan (Principal and Interest) (Special) (LVR < 70%)

  • Unlimited additional repayments
  • Unlimited free redraws
  • Optional 100% offset can be added for $120 p.a.^

Rates correct as of October 23, 2021. 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 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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author-avatar
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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