Up Bank launches home loans: here's what you need to know

Up Bank has announced it is entering the home loan market, joining the growing number of digital home loan lenders in Australia.

The Bendigo and Adelaide Bank-backed lender revealed it is opening early access to owner-occupier refinancers for its first home loan product, Up Home. To be eligible for early access, you will need to be an existing Up Bank customer.

The digital bank is aiming to open applications up for wider purposes “on the horizon”, but for now eligibility is limited to refinancing.

Up Bank is offering eligible refinancers the following interest rates at its initial opening:

Source: Up.com.au

Refinancers may be eligible with loan-to-value ratios (LVRs) as high as 90%. On the variable rate loan, you may be able to make unlimited additional repayments, with extra repayments capped at $30,000 for a fixed rate loan. Up Home also comes with up to 50 free offset accounts. And in a rising interest rate environment, utilising offset accounts may help you to reduce your interest charges.

Up Home also advertises that it does not charge application or set up fees, as well as no monthly or annual fees, redraw fees or discharge fees. Up CEO Xavier Shay said Up Bank’s home loan offering is “just different”.

“It’s less like the traditional bank loan experience and more like the Up you know and love. Your finances can feel easy again, and you can use all the Up features that already help you save and make money feel simpler,” he said.

How do digital banks compare?

As a digital bank, Up Bank is entirely app-based. Sometimes referred to as a neobank, this type of home loan lender may offer several advantages to traditional big banks.

Typically, a digital mortgage may come with lower interest rates or fewer fees than standard home loans from large institutions. This is because digital banks have fewer overheads than the big banks, such as having no branches or branch staff. By keeping expenditure lower comparatively, they may be able to pass savings on to customers. In the instance of Up Bank, Up Home does not come with a multitude of fees charged by big banks, like annual fees.

Further, a digital bank may provide more innovation in terms of products and tools, as they tend to be on the forefront of fintech. This can be through new digital savings tricks for your saver account or being the first to roll out contactless payment technology. If you’re a fan of innovative technology, a digital bank may suit your needs.

One barrier to making the switch to a digital home loan can be the lack of brand recognition for a digital bank versus the sense of security a big bank may offer. Australians are more familiar with the big four banks than these new players. But it’s important to remember that many digital banks are funded by the big lenders, with Up Bank backed by Bendigo and Adelaide Bank

Whichever lender you prefer, it’s important to always compare the interest rate, fees and features offered by the home loan as well. If you’re still unsure about whether a digital bank is right for you, it may be worth reaching out to a mortgage broker for more information tailored to your specific financial needs.

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