Who is still offering low-rate home loans after the July 2022 rate hike?

Many of Australia’s mortgage holders may be feeling the pinch after three months of back-to-back interest rate rises. But even though home loan interest rates are trending upwards, there are still some lenders offering low-rate home loan deals that may be worth considering for some buyers. 

How high have interest rates risen? 

Between May 2022 and July 2022, the Reserve Bank of Australia (RBA) has increased the national cash rate target by 125 basis points, taking it from the record low of 0.10 per cent to 1.35 per cent.

With many mortgage lenders passing these increases on in full, RateCity research shows that homeowners with a $500,000 home loan balance and 25 years remaining on their mortgage could find themselves paying $333 more in July in home loan repayments than they were in April 2022.

Who is offering some of the lowest interest rates?

While interest rates are on the rise, at the time of writing there are still a significant number of mortgage lenders offering interest rates of less than 3 per cent.

That said, it’s essential to compare home loans before applying for your first home loan or refinancing your existing home loan, and to consider more than just the interest rate. Often a home loan’s fees, features and other benefits can affect the value it may offer a borrower.

For example, at the time of writing, homeloans.com.au’s Low Rate Home Loan – Prime has a variable interest rate at 2.64 per cent (comparison rate 2.64 per cent), and also offers access to extra repayments, free redraws, and an offset account. That said, it’s only available to owner occupiers and has a maximum Loan to Value Ratio (LVR) of 60 per cent – in other words, you need a 40 per cent deposit or equity to apply.

Some home loans have low interest rates but more limited access to extra features and benefits than others. For example, ubank’s Neat Home Loan has a variable interest rate at time of writing of 2.64 per cent (comparison rate 2.65 per cent), but also has a maximum LVR of 60 per cent, is limited to owner occupiers only, and doesn’t offer access to an offset account.

A few low-rate home loans offer special deals for borrowers who fulfil their eligibility criteria. For example, unloan’s Variable Rate Home Loan is limited to owner occupiers who are refinancing only, and doesn’t offer access to an offset account, but at the time of writing it offers 2.64 per cent variable interest rate (2.56 per cent comparison rate) with an extra 0.01 per cent discount every year, up to a maximum discount of 0.30 per cent.

There are several other low-rate home loans available for borrowers to compare from the likes of:

• P&N Bank;
• Resi Mortgage;
• Yellow Brick Road;
• Homestar Finance;
• Credit Union SA;
• AFG Home Loans;
• Qudos Bank;
• Pacific Mortgage Group;
• Freedom Lend;
• Reduce Home Loans;
• Auswide Bank, and;
• Unity Bank, to name but a few.

Remember to always compare home loans before making a decision, considering more than just the interest rate.

When will interest rates start to go back down?

While there’s no 100 per cent accurate method to predict Australian interest rates over the long term, the RBA has forecast that inflation should peak at around seven per cent at the end of 2022. The RBA also expects that the cash rate could get as high as 2.5 per cent, which is right in the middle of the RBA’s preferred 2 to 3 per cent inflation target. The speed at which the cash rate reaches this figure may depend on future data and economic events.

A few economists are forecasting that once inflation starts to fall as international supply issues are resolved and higher rates have their intended effect on the Australian economy, the RBA may cut rates towards the end of 2023 or some time in 2024.

Until then, Australian mortgage holders may need to budget for higher interest rates as part of their mortgages.

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