The cheapest home loans on the market

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You might be surprised to learn that various lenders are currently offering some of the cheapest mortgage rates in Australia’s history.

You might also be surprised to learn the names of these lenders – because they’re not your father’s lenders.

The big four banks might be market leaders, but they’re not price leaders. That’s why they often get undercut by smaller rivals, many of which are relatively new to the market.

We’re talking credit unions, building societies and non-bank lenders.

They’re still regulated and they offer many of the same services as banks – they just fit into a different technical category.

If you’re rusted on to the big four banks, there’s no point reading any further. But if you’re open to shopping around, you might be shocked when you discover the rates being offered by some of these challenger lenders.

The big four’s average discounted variable rate for owner-occupiers is 4.23 per cent. But if you browse the 4,000-plus loans on RateCity’s comparison search engine, you’ll find these options:

Lender Product Advertised rate Comparison rate
Reduce Home Loans Rate Buster Standard Variable 3.39% 3.39%
FreedomLend Freedom Variable Home Loan 3.49% 3.49%
Hume Bank First Home Starters Package 3.49% 4.62%
Pacific Mortgage Group Standard Variable Home Loan 3.54% 3.54% Essentials Home Buyer Special 3.54% 3.56%

But what if you wanted to take out a three-year fixed rate, instead of a variable rate?

The big four’s average three-year rate is 4.01 per cent. Again, though, there are significantly cheaper options:

Lender Product Advertised rate Comparison rate
Move Lockit Home Loan 3.69% 3.96%
SCU My Life Home Loan Package 3.69% 4.00%
Auswide Bank Freedom Package Home Loan Plus Fixed 3.69% 4.44%
Greater Bank Ultimate Fixed Home Loan 3.74% 4.42%
Queenslanders Credit Union Special Fixed Home Loan 3.78% 4.36%

It’s important to point out that the cheapest loan isn’t always the best loan. Some borrowers, depending on their circumstances, might be better off taking out a higher-rate loan.

But if a low-rate loan was suitable, you could save tens of thousands of dollars over the life of the loan if you chose a challenger lender over a big four bank.

Imagine you were an owner-occupier who wanted to take out a $300,000 mortgage over 30 years. Here’s how your repayments would look if you compared the average big four bank with a low-rate alternative:

Variable loan

Interest rate Monthly repayments Total repayments
Reduce Home Loans 3.39% $1,329 $478,361
Big four 4.23% $1,472 $530,031
Difference 0.84% $143 $51,670

Three-year fixed loan

Interest rate Monthly repayments Total repayments
Move 3.69% $1,379 $496,495
Big four 4.01% $1,434 $516,231
Difference 0.32% $55 $19,736

^Words such as "top", "best", "cheapest" or "lowest" are not a recommendation or rating of products. This page compares a range of products from selected providers and not all products or providers are included in the comparison. There is no such thing as a 'one- size-fits-all' financial product. The best loan, credit card, superannuation account or bank account for you might not be the best choice for someone else. Before selecting any financial product you should read the fine print carefully, including the product disclosure statement, fact sheet or terms and conditions document and obtain professional financial advice on whether a product is right for you and your finances.

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