Home loans hit new record low of 1.98%

Homestar Finance has today claimed the title of the lowest fixed rate on the market for new home buyers and refinancers.

The new rate of 1.98 per cent is fixed for one year, reverting to an ongoing variable rate of 2.49 per cent. The rate requires borrowers to have a 20 per cent deposit and comes with upfront fees totalling $1,010.

RateCity.com.au analysis shows if an owner-occupier with a $400,000 home loan switched from the average existing owner-occupier rate of 3.28 per cent, to this new rate from Homestar Finance they could potentially save $3,796 in the first year, including refinancing costs, or $15,816 in the first five years.

Sally Tindall, research director at RateCity.com.au, said today's rate cut would ignite further competition among the low-cost lenders in a bid to claim the title of Australia’s cheapest home loan.

“At 1.98 per cent, this is the lowest fixed rate available to everyday Australians, but it’s important to remember it only lasts for a year. That said, the revert rate is still significantly lower than the big four banks’ variable rates,” she said.

Despite no move to the cash rate, lenders are continuing to cut both fixed and variable rates. Just last week, loans.com.au launched a new lowest introductory variable rate of 1.99 per cent for one year.

“It’s starting to feel like the end of an auction where the competitors are edging each other on in small increments,” she said.

“But they’re all playing ball, pushing each other below the 2 per cent barrier.

“We expect rates to keep nudging lower over the next few months as lenders try to capitalise on the current refinancing boom,” she said.

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