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The cheapest home loans on the market
You might be surprised to learn that various lenders are currently offering some of the cheapest mortgage rates in Australia’s history.
You might also be surprised to learn the names of these lenders – because they’re not your father’s lenders.
The big four banks might be market leaders, but they’re not price leaders. That’s why they often get undercut by smaller rivals, many of which are relatively new to the market.
We’re talking credit unions, building societies and non-bank lenders.
They’re still regulated and they offer many of the same services as banks – they just fit into a different technical category.
If you’re rusted on to the big four banks, there’s no point reading any further. But if you’re open to shopping around, you might be shocked when you discover the rates being offered by some of these challenger lenders.
The big four’s average discounted variable rate for owner-occupiers is 4.23 per cent. But if you browse the 4,000-plus loans on RateCity’s comparison search engine, you’ll find these options:
| Lender | Product | Advertised rate | Comparison rate |
|---|---|---|---|
| Reduce Home Loans | Rate Buster Standard Variable | 3.39% | 3.39% |
| FreedomLend | Freedom Variable Home Loan | 3.49% | 3.49% |
| Hume Bank | First Home Starters Package | 3.49% | 4.62% |
| Pacific Mortgage Group | Standard Variable Home Loan | 3.54% | 3.54% |
| Loans.com.au | Essentials Home Buyer Special | 3.54% | 3.56% |
But what if you wanted to take out a three-year fixed rate, instead of a variable rate?
The big four’s average three-year rate is 4.01 per cent. Again, though, there are significantly cheaper options:
| Lender | Product | Advertised rate | Comparison rate |
|---|---|---|---|
| Move | Lockit Home Loan | 3.69% | 3.96% |
| SCU | My Life Home Loan Package | 3.69% | 4.00% |
| Auswide Bank | Freedom Package Home Loan Plus Fixed | 3.69% | 4.44% |
| Greater Bank | Ultimate Fixed Home Loan | 3.74% | 4.42% |
| Queenslanders Credit Union | Special Fixed Home Loan | 3.78% | 4.36% |
It’s important to point out that the cheapest loan isn’t always the best loan. Some borrowers, depending on their circumstances, might be better off taking out a higher-rate loan.
But if a low-rate loan was suitable, you could save tens of thousands of dollars over the life of the loan if you chose a challenger lender over a big four bank.
Imagine you were an owner-occupier who wanted to take out a $300,000 mortgage over 30 years. Here’s how your repayments would look if you compared the average big four bank with a low-rate alternative:
Variable loan
| Interest rate | Monthly repayments | Total repayments | |
|---|---|---|---|
| Reduce Home Loans | 3.39% | $1,329 | $478,361 |
| Big four | 4.23% | $1,472 | $530,031 |
| Difference | 0.84% | $143 | $51,670 |
Three-year fixed loan
| Interest rate | Monthly repayments | Total repayments | |
|---|---|---|---|
| Move | 3.69% | $1,379 | $496,495 |
| Big four | 4.01% | $1,434 | $516,231 |
| Difference | 0.32% | $55 | $19,736 |
Disclaimer
This article is over two years old, last updated on November 2, 2017. While RateCity makes best efforts to update every important article regularly, the information in this piece may not be as relevant as it once was. Alternatively, please consider checking recent home loans articles.
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Product database updated 19 Dec, 2024
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