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Compare some of Australia's best home loan mortgage rates
Find your best mortgage rate by searching and comparing home loans quickly and easily on RateCity. Rates starting from 4.99% (comparison rate* 6.15%).
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What affects mortgage rates in Australia?
Home loan interest rates are affected by a wide variety of economic factors, both in Australia and overseas. Understanding the factors that influence home loan interest rates can provide valuable insights when comparing mortgage options.
Arguably the most important factor to follow is the national cash rate, which is set by the Reserve Bank of Australia (RBA) each month. Lenders generally raise mortgage rates when the cash rate is increased and lower them when the cash rate is cut. Keeping track of changes to the cash rate could give you a better idea of what may happen to mortgage rates in Australia.
Some of the domestic data that influences the cash rate includes:
- Quarterly and monthly inflation figures
- Retail trade figures
- The unemployment rate
- Business and consumer confidence levels
Keeping an eye on economic indicators and understanding their impact on interest rates may help you to make pre-informed decisions when comparing home loans and choosing the most suitable option for your financial circumstances.
Who offers the best home loan rates in Australia?
The "best" mortgage rate for you is typically one that matches your financial needs and requirements. There is no one “best” home loan interest rate on the market. You may assume that the best rate is the cheapest home loan interest rate available in Australia, but that isn't always the case. For example, the right home loan for your financial needs and budget may have a higher rate than others because it offers additional perks, like a packaged credit card or an offset account.
There are some features that borrowers typically look for in a competitive mortgage. These may change the total cost of the home loan depending on how many you focus on:
- A lower-than-average interest rate and comparison rate
- Few, or no, ongoing fees
- Features, such an offset account, redraw facility or making extra repayments
- Signup perks, such as cashback offers
- Packages, such as linked credit cards or transaction accounts
When you’re comparing home loans, try to keep in mind that there is more to it than just the interest rate. Your definition of the best home loan in Australia may differ from someone else’s.
For example, if you depend on face-to-face customer service, you may find that an online-based lender isn’t your best option – even if one offered a lower rate loan. And while major financial institutions like the big four banks (CBA, Westpac, ANZ and NAB) may be able to provide you with more products under the one bank, the nearest bank in your regional area may be a smaller credit union. It all depends on what you prioritise with a lender, and what type of service you are seeking.
A comparison rate takes into consideration many of the fees a mortgage lender will charge, as well as the interest rate, to calculate a “truer” cost for the home loan.
If your best mortgage is one that doesn’t cost you an arm and a leg, then choosing a home loan with a competitive comparison rate may be worth considering, as this could indicate a low interest rate and low fees. If a loan has a low advertised rate, but a much higher comparison rate, it likely has costly ongoing fees.
Keep in mind that not every fee is factored into a comparison rate. Upfront and ongoing fees are commonly included in the calculations, but nonstandard fees for accessing home loan features and benefits may not.
Also, keep in mind that for consistency, each comparison rate is based on a $150,000, 25-year home loan, paying principal and interest. While this was once an example of a typical home loan, today it’s considerably lower than the median dwelling prices across most capital cities in Australia. This means that even the best comparison rate may not accurately reflect a home loan’s total cost in all circumstances, so it’s often still worth taking a close look at the rates and fees.
Banks vs non-banks: how do they compare?
One factor to consider when researching the best home loan option for you is the type of lender you're considering applying with. Depending on what you need from your home loan, banks and non-bank mortgage lenders offer a range of competitive perks and features to compete in the market.
If low rates and waived fees matters to you
Consider comparing some non-big bank lenders. RateCity’s database shows that on average, smaller lenders generally offer lower variable interest rates. This is because these smaller lenders tend to have fewer overheads to pay for and may be able to pass on these savings to customers.
If customer service matters to you
Consider comparing home loans from financial institutions in your area. If you rely on face-to-face customer service, then an online-based lender may not suit your needs. The bigger banks typically have more resources available to borrowers in the way of customer service, particularly in regional areas.
If innovation and fintech matters to you
Consider comparing non-bank lenders who are bringing innovation to the Australian banking sector. Neobanks, for example, are app-based lenders who may compete by pushing the boundaries of fintech.
If security matters to you
Consider that not every home loan lender is classified as an Authorised Deposit-taking Institution (ADI), and only these ADIs (and your deposit up to the value of $250,000) are protected by the Financial Claims Scheme.
Pros and cons of non-bank lenders
Benefits
- May offer lower interest rates and fewer fees
- May provide innovative fintech, helpful apps and online services
Drawbacks
- May offer substandard customer service if you rely on face-to-face, in-branch service
- Risk that the lender is not an ADI, and your deposits are not protected by the Financial Claims scheme
Home loan interest rates vary across a wide scale, and typically follow the movements of the Reserve Bank of Australia's cash rate. If the cash rate currently sits at, say, 4%, you could expect home loan interest rates to be upwards of this rate.
As of August 2024, the average rates according to the RBA are:
- Owner-occupier outstanding loans: 6.06%
- Owner-occupier new loans: 6.27%
- Investor outstanding loans: 6.43%
- Investor new loans: 6.50%
Source: RBA. Includes loans at variable and fixed interest rates.
How do the banks set their mortgage interest rates?
Banks and lenders are influenced by several factors when they set their rates, including the Reserve Bank of Australia’s (RBA) cash rate, market reference rates and deposit rates. The actual home loan rate you will be offered will also depend on your borrower type, your credit history, your deposit size, and several other factors.
Different types of home loans may affect the rate. There are a variety of home loan types and features available, all of which affect the overall cost, including the interest rate the lender will charge. A more basic, no-frills loan may come with a lower interest rate than one with home loan features, which may make it the best mortgage for you in some circumstances.
Further, smaller lenders with fewer overheads than their big competitors may choose to offer lower interest rates to compete in the market. All of this comes into play when a lender sets its interest rates and is why rates will differ across each lender and each home loan.
If you want to know the current average interest rates for various borrower types, it may be worth checking out the RBA's Lenders' Interest Rates page.
How do you decide which is the right mortgage for you?
To find the best home loan option for you, you’ll need to ask yourself a few key questions:
Are you an owner-occupier or an investor?
Banks typically offer different home loans to owner occupiers who live in their properties, and to investors who rent out their properties to tenants. Lower interest rates may be offered on owner-occupier loans than investment loans, as someone living in the asset they’ve offered up as security on a loan is seen as less likely to miss mortgage repayments and default than an investor.
How large is your home loan deposit?
The deposit you save up may also affect the home loan. This is because home loan lenders typically offer more competitive interest rates to those with bigger deposits. A deposit of at least 20% or more, or a loan-to-value ratio (LVR) of 80% or less, can make you seem more reliable and secure than an applicant with a smaller deposit as it showcases a greater level of financial discipline.
Do you want to make principal & interest or interest-only repayments?
You’ll also need to decide between making principal and interest repayments or interest-only repayments. Paying off the principal so you can chip away at your loan amount faster may seem like a no-brainer. But for investors, interest-only loans can help to keep expenses much lower so they may potentially earn a greater return when they sell the property. To find the best home loan option for your needs, it may be worth weighing up the pros and cons of both repayment types before you apply for a mortgage.
Will you choose a fixed or variable interest rate?
A fixed home loan rate may offer more stability in your budget as you’re locking in the rate for a set period of time. Lenders may also offer competitive deals on fixed rate loans, particularly if they expect rates to lift soon. Comparatively, variable rate loans will fluctuate based on market conditions, which may increase or decrease your home loan repayments. Variable rate home loans also tend to offer more features than fixed rate home loans, so if features are important to you then this is worth considering.
Can you afford a 2-3% rate rise?
Another good question to ask yourself before applying for any home loan is whether you can afford to repay higher mortgage repayments if rates were to increase. Over a 20–30-year home loan term, interest rates will move, and you need to be prepared. A good rule of thumb is to test your ability to afford mortgage repayments at a 3% higher rate. For example, if a lender advertises a rate of 5.75%, you may want to calculate if you could afford repayments as if the rate were 7.75% and higher.
Ideally, you want to try to keep your mortgage repayments under 30% of your pre-tax income, as paying a higher percentage is considered to be “mortgage stress”. Of course, this may not be as easy as it sounds.
There are a range of home loan fees that a lender may charge you, including upfront, ongoing and exit fees. These will factor into the overall cost of your mortgage, and may include:
- Application fees
- Valuation fees
- Package fees
- Monthly service fees
- Annual fees
- Redraw fees
- Discharge fees
- Fixed rate break fees (if refinancing from a fixed rate home loan)
If your home loan comes with features, the lender may be more likely to charge you more in ongoing costs, like an annual fee. If you want to avoid paying as many fees as possible, a no-frills basic home loan may better suit your budget.
Fact Checked
The information on this page was fact checked by Matthew Tinson, a broker in Queensland specialising in home loans, car financing, personal loans, debt consolidation, and asset financing. For more information on how brokers like this can assist you, look for a broker near you.
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^Words such as "top", "best", "cheapest" or "lowest" are not a recommendation or rating of products. This page compares a range of products from selected providers and not all products or providers are included in the comparison. There is no such thing as a 'one- size-fits-all' financial product. The best loan, credit card, superannuation account or bank account for you might not be the best choice for someone else. Before selecting any financial product you should read the fine print carefully, including the product disclosure statement, target market determination fact sheet or terms and conditions document and obtain professional financial advice on whether a product is right for you and your finances.
