Rates on hold but market still awash with home loan bargains

Rates on hold but market still awash with home loan bargains

The RBA has this afternoon announced that rates will remain on hold for the moment but banks are continuing to offer low interest rate deals for ideal borrowers with big deposits.

RateCity data shows that ideal owner occupier borrowers, who have at least a 20 per cent deposit, are getting the best deals with rates up to 0.55 per cent lower than other mortgage holders.

“The five lowest variable rates on our site are only for people with deposits of 30 per cent or more,” said Sally Tindall, money editor at RateCity.

“This demonstrates the current trend of lenders favouring low risk loans for owner occupiers. On the other hand investors are financing these discounts, with higher interest rate loans the only option on offer to these borrowers.”

While this is bad news for investors, for ideal borrowers with a large deposit saved up competitive rates abound and they have their pick of the bunch.

“This is all about banks minimising risk by lending to secure borrowers and they are right to reward them with lower rates,” said Tindall.

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New customers are the other big winners in the competitive rate wars with banks luring these customers by dropping their lowest variable rate exclusively for them. Whilst these introductory offers are great for new home buyers who are looking for an incentive to enter the property market now, it does suggest that loyalty is dead for old customers.

Ms Tindall suggests an upfront approach for those who find that their bank is offering a better deal to new customers.

“If this is happening to you check what your bank is offering new customers and ask for that same low rate. There’s nothing wrong with calling and negotiating a better deal with your lender.”

With the number of lenders offering rates under 4 per cent reaching over 20, borrowers have plenty of bargaining power.

“The market is very competitive at the moment so if your bank won’t budge on your rate don’t be afraid to switch if need be,” said Tindall.

With rates so low and competition so high now is a good time to compare your home loan with what’s on the market to make sure you’re getting the best deal possible. 

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How common are low-deposit home loans?

Low-deposit home loans aren’t as common as they once were, because they’re regarded as relatively risky and the banking regulator (APRA) is trying to reduce risk from the mortgage market.

However, if you do your research, you’ll find there is still a fairly wide selection of banks, credit unions and non-bank lenders that offers low-deposit home loans.

Mortgage Calculator, Deposit

The proportion you have already saved to go towards your home. 

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We work closely with lenders to get updates as quick as possible, with updates made the same day wherever possible.

Mortgage Calculator, Loan Term

How long you wish to take to pay off your loan. 

What is bridging finance?

A loan of shorter duration taken to buy a new property before a borrower sells an existing property, usually taken to cover the financial gap that occurs while buying a new property without first selling an older one.

Usually, these loans have higher interest rates and a shorter repayment duration.

What is appraised value?

An estimation of a property’s value before beginning the mortgage approval process. An appraiser (or valuer) is an expert who estimates the value of a property. The lender generally selects the appraiser or valuer before sanctioning the loan.

What is the ratings scale?

The ratings are between 0 and 5, shown to one decimal point, with 5.0 as the best. The ratings should be used as an easy guide rather than the only thing you consider. For example, a product with a rating of 4.7 may or may not be better suited to your needs than one with a rating of 4.5, but both are probably much better than one with a rating of 1.2.

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You don’t need to input any information to see the default ratings. But the more you tell us, the more relevant the ratings will become to you. We take your personal privacy seriously. If you are concerned about inputting your information, please read our privacy policy.

Mortgage Calculator, Interest Rate

The percentage of the loan amount you will be charged by your lender to borrow. 

Does each product always have the same rating?

No, the rating you see depends on a number of factors and can change as you tell us more about your loan profile and preferences. The reasons you may see a different rating:

  • Lenders have made changes. Our ratings show the relative competitiveness of all the products listed at a given time. As the listing change, so do the ratings.
  • You have updated you profile. If you increase your loan amount, the impact of different rates and fees will change which loans are the lowest cost for you.
  • You adjust your preferences. The more you search for flexible loan features, the more importance we assign to the Flexibility Score. You can also adjust your Flexibility Weighting yourself, which will recalculate the ratings with preference given to more flexible loans.

Mortgage Calculator, Property Value

An estimate of how much your desired property is worth. 

What happens to your mortgage when you die?

There is no hard and fast answer to what will happen to your mortgage when you die as it is largely dependent on what you have set out in your mortgage agreement, your will (if you have one), other assets you may have and if you have insurance. If you have co-signed the mortgage with another person that person will become responsible for the remaining debt when you die.

If the mortgage is in your name only the house will be sold by the bank to cover the remaining debt and your nominated air will receive the remaining sum if there is a difference. If there is a turn in the market and the sale of your house won’t cover the remaining debt the case may go to court and the difference may have to be covered by the sale of other assets.  

If you have a life insurance policy your family may be able to use some of the lump sum payment from this to pay down the remaining mortgage debt. Alternatively, your lender may provide some form of mortgage protection that could assist your family in making repayments following your passing.

Mortgage Calculator, Repayment Type

Will you pay off the amount you borrowed + interest or just the interest for a period?

What is a specialist lender?

Specialist lenders, also known as non-conforming lenders, are lenders that offer mortgages to ‘non-vanilla’ borrowers who struggle to get finance at mainstream banks.

That includes people with bad credit, as well as borrowers who are self-employed, in casual employment or are new to Australia.

Specialist lenders take a much more flexible approach to assessing mortgage applications than mainstream banks.