May 15, 2011
Lenders are rushing to offer customers discounted standard variable loans to try and boost their market share. And Australians are more than happy to take the opportunity to save money on their home loan.
A recent Mortgage Choice survey reported that standard variable rate home loans accounted for 30 percent of the company’s new loan approvals in April. Basic variable loans followed at 25.6 percent, with ongoing discount loans coming in third at 23.3 percent.
All the major banks are currently offering discounted variable rates with NAB, the Commonwealth, ANZ and St George leading the charge. Westpac has announced plans to lower rates at the end of 2012, independent of the Reserve Bank of Australia’s cash rate.
What’s the deal with discounted home loans?
- Discounts usually begin at around 0.7 percent and can be as much as 1.1 percent depending on how much you are borrowing and the size of your deposit.
- St George is currently offering a discounted rate of 1 percent for the first 12 months of your loan, which then reverts to 0.7 percent afterwards.
- These types of loans usually incur an annual fee between $350 and $395.
- While the Big Four are easily able to vie for business at this level, it’s harder for smaller lenders to compete on such a large scale.
- To qualify for an interest rate reduction, the minimum loan requirement is usually $250,000, and discounts increase markedly for loans of $500,000 and above.
- There are additional discounts for borrowers who can raise more than a 25 percent deposit.
Related mortgage links