RateCity.com.au
Advertisement

Compare 2018 mortgage rates and calculate mortgage repayments

Find home loans from a wide range of Australian lenders that best suit your needs. Compare interest rates, mortgage repayments, fees and more. - Data last updated on

Compare 2018 mortgage rates and calculate mortgage repayments

! Sorry we could not find any products that match your search

Here are a few points:

1Talk to an expert

Get expert advice about this loan

Your Home Loans profile

  • Borrowing Amount:$250,000
  • Deposit Percentage:40%

Enter your details to be contacted by an Aussie mortgage expert in your area who can help find the right home loan for you

First name

Last name

Phone number

Postcode

Loan Purpose

By submitting this form, I accept RateCity's terms and conditions, privacy policy and Collection Statement for this service.

Yes, I'd like to get email updates from RateCity

We can negotiate discounts and lower rate for you

Submit your details now and a local expert will be in touch within a few business hours. They'll compare hundreds of home loans from up to 20 lenders including the big banks to find the loan that's right for you.

Loan Market Pty LTD | Australian Credit License 390222 ABN 89 105 230 019

2Start a new search

3Expand Search

Advertisement

How to compare mortgage rates

The right mortgage rates can make an enormous difference to your unique financial situation, whether you’re applying for your first home loan, or refinancing an existing mortgage.

But what are the differences between the variable, fixed, split and comparison rates that are available from different lenders? 

By putting the details of a variety of home loan offers all in one place, RateCity can help you forecast the effects of mortgage rates  on your budget. You’ll also have the option to narrow down your shortlist of lenders to only those offering the rates and features that will ideally suit your lifestyle.

How do mortgage rates affect my home loan?

The lower the interest rate you pay on your home loan, the more you can save in mortgage interest charges over time.

For example, imagine you have 20 years left on your mortgage and you refinance from a home loan with an interest rate of 4.50% to one at 4.00%. Here’s how much you could save, based on the size of your outstanding debt:

$300,000 $500,000 $700,000
Total repayments at 4.5% $455,508 $759,179 $1,062,851
Total repayments at 4.0% $436,306 $727,176 $1,018,047
Savings $19,202 $32,003 $44,804

Above hypothetical examples are for illustrative purposes only. Calculations source: MoneySmart

What are variable mortgage rates

Many of the home loans available in Australia have variable interest rates, which rise and fall over the lifetime of the loan.

These rates are typically based upon Australia’s official cash rate, which is  set by the Reserve Bank of Australia – when the RBA meets and brings the cash rate up or down, the nation’s lenders often raise or lower their mortgage rates accordingly. 

By choosing a variable mortgage rate, your monthly repayments may be reduced if interest rates are cut, saving you some money and providing you with some financial flexibility. But if interest rates go up, you may find yourself having to pay more for your mortgage than you initially bargained for, which could put you at risk of mortgage stress.

Quick guide to mortgage stress

Households are said to be suffering from mortgage stress when 30% or more of their pre-tax household income is being swallowed by mortgage repayments.

Life becomes stressful at this point because once households have paid for their mortgage, day-to-day essentials and other fixed costs, they will have little if any money left over. That’s why it’s so important to factor in interest rate rises before taking out a mortgage.

Go to a home loan calculator and punch in some numbers. Could you afford the mortgage if interest rates rose by 1, 2 or 3 percentage points? If the answer is no, you may need to think long and hard before taking out a home loan, because a rate change could place you in mortgage stress.

What are fixed mortgage rates?

Another option to consider is fixing the interest rate on your home loan for several years, so your finances stay insulated from the effects of rate rises. A fixed rate mortgage can help to keep your household budgeting nice and simple, as your repayments remain the same from month to month for the duration of the fixed term.

However, a fixed mortgage means that if interest rates fall, you won’t enjoy the benefit of savings on your monthly repayments, as you’ll still be locked into your fixed rate. Breaking from the predetermined repayment plan can often prove quite expensive in terms of break costs, so you may not enjoy as much financial flexibility from a fixed rate home loan.  

What are split mortgage rates?

Some lenders allow you to enjoy the best of both worlds between variable and fixed mortgage rates with the help of a split rate home loan. 

In a split rate mortgage, a fixed rate of interest is charged on a percentage of your loan, and a variable rate of interest is charged on the remainder. The fixed percentage helps to keep your mortgage repayments relatively stable if rates rise, while the variable percentage allows you to enjoy some benefits and savings if rates fall.

What is a comparison rate?

The comparison rate isn’t another interest rate option like variable, fixed or split rates. Instead, it’s a figure used for estimating the approximate total cost of different mortgage options. 

Most lenders charge fees as well as interest on the home loans they offer, which can make a significant impact on their total cost to borrowers. A mortgage with a low interest rate and high fees can sometimes turn out to be more expensive than a mortgage with a higher interest rate and lower fees. 

To make the total cost of different mortgage offers clearer to borrowers, lenders are required to provide comparison rates for each of their home loans.

A comparison rate combines the interest rate of a mortgage with its standard fees and charges, and expresses the total as a single percentage. This can make comparing the approximate total cost of different home loans side by side much simpler. 

It’s important to remember that even a home loan’s comparison rate may not take its every cost into account – some loans have nonstandard costs associated with some of their optional features that aren’t included when calculating its comparison rate.

Plus, some home loans come with features that can provide extra value to you, but also aren’t accounted for in the comparison rate. 

How does your loan term affect your mortgage rate?

It’s important to consider the impact your mortgage rates could have on your finances in relation to the length of your loan’s term. Most home loans start with a term of 25 or 30 years, though shorter and longer options are available.

Paying a home loan off over a longer period will involve making a greater number of repayments, each one for a smaller percentage of the loan’s principal. While these smaller repayments may be more affordable from month to month, you may ultimately end up paying more interest in total over the lifetime of the loan.

Conversely, a shorter home loan term means making a smaller number of repayments, each one for a larger percentage of the loan’s principal. While these repayments may be less affordable from month to month, the smaller number or interest payments may mean ultimately paying less interest in total over the lifetime of the loan.

Monthly repayments Total interest charged Total loan cost
$500,000 mortgage at 4% interest on a 25 year term $2639 $291,755 $791,755
$500,000 mortgage at 4% interest on a 30 year term $2387 $359,348 $859,348

Above hypothetical examples are for illustrative purposes only. Calculations source: MoneySmart

What kind of borrower are you?

Different home loans may be more appealing to different borrowers, and your financial situation could also make an impact on what mortgage rates your lender offers.

Owner occupiers, whether they are first home buyers or existing homeowners upgrading to new properties, are more likely to be offered lower interest rates on their mortgages than investors, as lenders often consider the risk of these homeowners defaulting on their repayments to be relatively safe.

While the flexibility of variable rates may appeal to owner occupiers, first home buyers can often find the stability of fixed rate mortgages useful for managing their repayments while they build up their equity, especially if they’re on a discounted introductory rate.

Of course, these borrowers should also remember that these “honeymoon” rates will eventually revert to the lender’s standard variable rates, and budget accordingly to ensure they can still afford the repayments.

Mortgages for investors are more likely to have higher interest rates, as lenders generally consider investment loans to be at higher risk of default. Plus, additional government regulations apply to investment home loans.

Whether you’re an owner-occupier or an investor, if you’re refinancing an existing home loan, your new interest rate will depend on a range of different factors, though generally the more equity you have in your current property, the lower the lender’s risk, and the lower the interest rates they can offer as a result. 

Mortgage rates from banks and non-banks

When looking at the mortgage rates for home loans from banks, it’s important to also consider whether they can provide additional value, such as bundling access to savings and transaction accounts, credit cards, and other bonus features along with the home loan.

Some banks have relatively strict mortgage lending criteria, offering less flexibility to suit different financial situations. 

Some non-bank lenders offer competitive interest rates, as well as flexible lending terms to better suit different household finances. However, these lenders may not be able to provide the same kind of home loan features and services available from certain banks.

For example, some non-bank lenders are online only, and operate with no branches or shopfronts, which means there’s no option to go through your home loan’s paperwork with your lender in person. 

Offset accounts and redraw facilities

Even if you have a mortgage with a good rate, there may be options and special features available to make smarter use of your available finances, and maximise the benefits of a low interest rate. 

An offset account is a savings or transaction bank account that’s linked to your home loan, so that any money paid into this account is included when calculating your interest, which can help to limit the size of your repayments.

For example:

If you have a home loan for $500,000, have paid off $200,000 so far, and also have $15,000 in your offset account, the lender will calculate your interest charges as if you owed $285,000 rather than $300,000, resulting in a slightly smaller repayment.

If you pay extra money onto your home loan, and get ahead of your repayment schedule, a redraw facility can allow you to withdraw these surplus funds from your loan (subject to the lender’s terms and conditions).

This can allow you to put more of your money towards clearing your mortgage debt ahead of schedule, bringing you closer to making an early exit from the loan, while remaining confident that you’ll be able to access these funds again if you need to manage an unexpended expense. 

How to shop for mortgage rates

While low interest rates are important qualities to look for when selecting a home loan, there’s plenty more to compare when looking at mortgage offers from different lenders. 

RateCity puts information on a wide variety of home loans all in one place, so you can quickly and efficiently narrow down your shortlist of potential loans to only those that best fit your financial situation.

  1. Are you applying for a new home loan, or refinancing an existing mortgage?
  2. Are you an owner occupier or an investor?
  3. Would you prefer a variable, fixed, or split mortgage rate?
  4. What are the fees? Have you looked at the comparison rate?
  5. How long is your loan term? Can you afford the repayments on your income?
  6. What mortgage features do you want? Can you get these, plus an affordable mortgage rate, from a bank or non-bank lender?

Why you should compare mortgage rates when conducting a home loan health check

A home loan is the biggest financial commitment that most people will ever make. It’s not just a big commitment, but a long commitment – generally 25 to 30 years.

That’s why a home loan should never be a “set-and-forget” product e.g. something you take out and then forget about for the next two or three decades. Instead, it should be something you review on a regular basis to ensure you’re getting the best interest rate, the best fees and the best features for your household’s unique needs.

In other words, it’s time for your home loan health check.

Compare mortgage interest rates

One reason to conduct regular home loan health checks is because a seemingly small difference in interest rates can make a big difference over the term of a loan.

Some people don’t refinance their mortgage because they don’t realise there are credible lower-rate options on the market. Other people do realise, but never get around to refinancing because they keep telling themselves, “There’s no rush, I’m only paying a few dollars extra per month.”

However, a small reduction in monthly repayments can add up to a big reduction in total repayments over the life of the loan.

The cheapest loan isn’t necessarily the best loan, but the interest rate is always an important factor when assessing the pros and cons of a mortgage.

By conducting a home loan health check, you can not only get an idea of how your home loan interest rate compares to the rest of the market, but also consider several alternative mortgage options.

Looking at home loan fees

Conducting a home loan health check shouldn’t mean just comparing mortgage interest rates. It’s also important to look at fees.

Many home loans come with ongoing fees, which can include:

  • monthly fees
  • annual fees
  • offset account fees

Borrowers can also be slugged with fees for making use of some home loan features, like redrawing funds or making additional repayments. Some lenders also get you on the way out by charging a discharge fee when you finally close the loan.

Fees can be a bit like interest rates in that paying a bit more in the short term can lead to a paying a lot more over the term of a loan.

Imagine, again, that you have 20 years left on your mortgage and you switch to a home loan with lower fees. Here are the sort of savings you might make:

  • $100 per year = $2,000 over 20 years
  • $200 per year = $4,000 over 20 years
  • $300 per year = $6,000 over 20 years
  • $400 per year = $8,000 over 20 years
  • $500 per year = $10,000 over 20 years

Still not convinced about the benefits of a home loan health check?

How to refinance a mortgage

Once you’ve done a home loan health check, if you decide you do want to switch home loans, you’ll have to refinance you mortgage.

How refinancing works:

  • Imagine you have a mortgage with Lender X, with an interest rate of 4.50%, outstanding debt of $300,000 and a remaining loan term of 20 years.
  • After comparing more than 100 lenders, you decide you like the look of Lender Y, which is offering a comparable product to Lender X, but with a mortgage interest rate of just 4.00%.
  • If you ultimately decide to refinance, Lender Y would repay your debt to Lender X – you would owe nothing to your old lender, and owe $300,000 to your new lender instead.

However, there are several refinancing traps to bear in mind before signing on the dotted line.

First, you should confirm that when you did your home loan comparison as part of your home loan health check, you considered the ‘comparison rate’, not just the ‘advertised rate’. The advertised rate only indicates the cost of interest on your mortgage, and doesn’t include fees and charges.

The comparison rate does factor in the costs of these fees, giving you a better idea of a loan’s total overall cost. With some loans, there will be no gap between the advertised and comparison rates, while others will have a significant gap of one percentage point or higher.

Second, if you do refinance, you may have to pay a range of fees to both lenders. Your old lender may slug you with a discharge fee, and if you’re exiting a fixed-rate loan ahead of schedule, you will probably have to pay break costs as well.

Your new lender will probably charge you any combination of the standard set-up fees – establishment fee, valuation fee and settlement costs. All these fees could easily add up to more than $1000.

A third trap to be aware of is the potential danger of refinancing in a falling market.

Imagine that when you bought the property it cost you $500,000 and you borrowed $400,000. That would have given you a loan-to-value ratio (LVR) of 80% and allowed you to avoid paying Lenders Mortgage Insurance, which is generally only payable if you have an LVR above 80%.

Now imagine that, two years later, you’ve decided to refinance, having reduced your debt to $385,000 – but having also seen the value of your property fall to $475,000.

When Lender Y values your property as part of the refinancing process, it will discover that your LVR is now 81% and charge you LMI, which could cost you thousands.

Finally, you should make sure that your new loan term matches your old.

The default loan term for many mortgages is 30 years, so if you’re not careful, you could accidentally shift from a mortgage that has 20 years left to run with Lender X into a mortgage that has 30 years with Lender Y. This could end up costing you more money, even if the mortgage interest rate is lower:

  • The total repayments for a $300,000 mortgage over 20 years at 4.50% is $455,508
  • The total repayments for a $300,000 mortgage over 30 years at 4.00% is $515,609

Above hypothetical examples are for illustrative purposes only. Calculations source: MoneySmart

You could save tens of thousands

Conducting regular home loan health checks is a no-brainer. After all, they’re quick, easy and free, plus there’s no obligation to refinance.

A home loan health check might reveal that there are alternative mortgages out there that could save you literally tens of thousands of dollars over the lifetime of your loan.

FAQs

The comparison rate is a more inclusive way of comparing home loans that factors in not only on the interest rate but also the majority of upfront and ongoing charges that add to the total cost of a home loan.

The rate is calculated using an industry-wide formula based on a $150,000 loan over a 25-year period and includes things like revert rates after an introductory or fixed rate period, application fees and monthly account keeping fees.

In Australia, all lenders are required by law to publish the comparison rate alongside their advertised rate so people can compare products easily.

Advertisement
Compare your product with the big 4 banks, or add more products to compare