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How to compare Australia's top home loan rates

How to compare Australia's top home loan rates

Much like Australian house prices, Australia’s home loan interest rates rarely stay still for long. Just when you think you’ve found the best home loan for you, another mortgage deal may come along, leaving your first choice looking second best. It’s important to compare Australia’s top home loan rates before selecting a mortgage offer, and understanding how different rates, fees, features and other benefits could help you.

Comparing like for like home loan rates

When comparing home loans, it’s important to compare “apples with apples”. Lenders often tailor their interest rates to suit specialist home loan deals for specific types of borrowers, such as first home buyers, refinancers, or investors.

Comparing the rates for a home loan from one category to those of a home loan from another category may not be an effective comparison. Even if one interest rate is significantly higher than the other, its other fees, features and benefits may improve its value for its intended customers.

What is a “low” home loan interest rate?

It’s not easy to set a definitive benchmark for a low rate home loan, as what’s considered a low rate for one type of home loan may not be a low rate for another type. Plus, borrowers in different financial situations may have different standards for low rates.

For example, the Reserve Bank of Australia (RBA) tracks average home loan interest rates, but these vary between existing home loans and new home loans, as well as other criteria. The average owner occupier variable rate may not be so helpful when comparing low fixed interest rates for an investment property, for example.

If you currently have a home loan and are looking to refinance, a simple option could be to compare potential new home loans to your current home loan – if they have lower interest rates, you may be able to save money on your monthly repayments, or try paying off your home loan faster and potentially pay less interest over the long term.

How to compare home loan interest rates

There are several options available for comparing the different home loan deals that are currently available in Australia.

For example:

How to filter your home loan search

The more information you can use to filter your search results on a home loan comparison site, the more closely and accurately you can compare mortgage rates and find the top choices that could suit your needs.

Different comparison websites may use different options for filtering your search results when comparing home loans, such as:

  • Loan purpose: Compare only home loans for first home buyers, investors, refinancers etc.
  • Loan amount: How much money you intend to borrow/how large a loan you intend to refinance, which can be helpful for estimating repayments.
  • Deposit: How large a percentage of the property’s value you can afford to pay upfront. When refinancing, this may be replaced by the equity you hold in your property.
  • Loan term: How long you want to take to pay off your home loan (often 20 to 30 years). This may also cover how long you want to fix your home loan rate for (often 1 to 5 years).
  • Repayment type:Principal and interest or interest-only?
  • Providers: Enter any specific banks or mortgage lenders you want to compare.
  • Features: Search for home loans that offer extra repayments, a redraw facility, or an offset account
  • Specials: Search for home loans that offer cashback, rewards points, or other bonuses on signup
  • Online partners: Choose whether to prioritise mortgage offers selected by the comparison site (who may have commercial relationships with the lenders), or include all lenders on the market who offer loans that match your criteria.

You can also choose to sort your search results:

  • in order of their interest rate;
  • in order of their comparison rate (which combines the cost of interest and standard fees into a single figure);
  • alphabetically, or;
  • by other metrics such as star ratings.

It’s also possible to create a custom comparison which puts more of their detail side by side. You can select one or more home loans for your custom comparison, or simply select one to compare with similar offers from Australia’s big four banks.  

Remember that even if you compare home loans side by side, it’s still important to look more closely at each deal before you consider signing on the dotted line – there may be more fees, features or other benefits you hadn’t considered.

For more help comparing home loans and finding the top interest rates to suit your needs, you could consider contacting a mortgage broker.

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This article was reviewed by Personal Finance Editor Georgia Brown before it was published as part of RateCity's Fact Check process.

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