HOME LOANS

News, info and tips to help you save smarter

Benchmark Interest Rate

A benchmark interest rate is the term given to describe the average interest rate among Australia’s major four banks – ANZ, Commonwealth, NAB and Westpac. It is also the term commonly used to refer to the minimum interest rate investors will accept when investing in a non-Treasury security.

In the home loans market, however, the benchmark interest rate is a useful tool when comparing lenders and their mortgages. That’s because it provides a standard by which to measure other lender’s financial products.

Movements in the market

The benchmark interest rate also helps to determine rates across the broader home loans market, and similarly for credit cards, personal loans and the like. That’s because the major four banks typically hold around 80 percent of the Australian mortgage market and their decisions with regards to rate movements tend to be a catalyst for other lender’s decisions to move interest rates.

So if the Reserve Bank holds the cash rate steady for instance, but one or more of the major four banks increase their home loan interest rates – in turn lifting the benchmark interest rate – then it’s likely that other lenders will follow suit.

If rates increase as a result, borrowers may wish to consider refinancing to a low interest mortgage because by doing so they could save thousands of dollars over the life of the loan. Irrespective of rate movements borrowers would be wise to revisit their mortgage every year and compare it to what else is on the market, and of course using the benchmark interest rate as a guide.

How to choose a mortgage

Typically, the big four lenders provide competitive interest rates on their products, but you’ll almost always find cheaper options by comparing home loans online at websites such as RateCity. You can find some of the most competitive rates by:

  • Visiting the compare home loans page at RateCity and searching for a mortgage to suit your circumstances
  • Comparing fixed and variable rate home loans
  • looking to the comparison rate to determine the real cost of the loan
  • also comparing fees and features when weighing up home loan options, because they can really add up over time
  • you can even visit RateCity’s Home Loan Guide for more information about finding the best  home loan for your needs
This is an information service. By browsing on the website and/or using our search tools, you are asking RateCity to provide you with information about products from multiple financial institutions. We will try to show you a range of products in response to your request for information. The search results do not include all providers and may not compare all features relevant to you, for further details refer to our FSCG. The rating shown is only one factor to take into account when considering these products. See the rating methodology. We not a credit provider, and in giving you product information we are not making any suggestion or recommendation to you about a particular credit product. If you decide to apply for a product, you will deal directly with a financial institution, and not with RateCity. Rates and product information should be confirmed with the relevant financial institution, and you should review the PDS before you decide to purchase. See our terms of use for further details. This advice is general and has not taken into account your objectives, financial situation or needs. Consider whether this advice is right for you.