Three mortgage lenders have reduced their interest rates in the span of two days, as competition intensifies among lenders.
The three lenders, including ME Bank, People’s Choice Credit Union and 86 400, have cut interest rates for both people living in their own properties and those renting them out.
People’s Choice Credit Union
People’s Choice Credit Union introduced a one-year fixed-rate home loan of 1.99 per cent (3.91 per cent comparison rate) for first home buyers paying principal and interest.
It’s the eighth lender to drop its interest rate below 2 per cent, as an increasing number of home loan rates start with a 1. The first lender to bring its interest to below 2 per cent was Bank of Us in late June, though that offer was exclusively for Tasmanians.
People’s Choice has slashed rates for both new and existing owner-occupier and investor customers, with the biggest cut of 64 basis points going to new customers paying interest-only variable rates to 3.09 per cent (3.09 per cent comparison rate). The rate only applies for borrowers with less than 80 per cent loan-to-value ratio (LVR).
The rate cuts come into effect on August 21.
ME Bank dropped its fixed interest rates by up to 40 basis points for its new and refinancing owner-occupier customers.
The bank’s lowest owner-occupier fixed rate is now 2.19 per cent for customers locked in for one, two or three years. Borrowers with LVRs less than or equal to 90 per cent are eligible for the rate.
ME’s general manager of home lending Andrew Bartolo said many of the bank’s customers want both the certainty of a low fixed rate, as well as the flexibility of being on a shorter term.
“This offer will help first home buyers achieve their dream of home ownership faster by only requiring a 10 per cent deposit (with lenders’ mortgage insurance), put more money back in their pockets through a lower rate, and give them peace of mind with certainty on exactly what their repayments will be a year or more in advance,” he said.
The rate reductions are effective from August 21.
Australian neobank 86 400 has launched a tiered system for its variable mortgage rates.
The changes effectively mean mortgage holders who have a lower LVR, or more equity in their property, may get a maximum discount on their variable rate of up to 25 basis points. The rate would typically remain the same for borrowers with more than 70 per cent LVR.
The variable rate a borrower may be eligible for is based on the LVR they have at approval:
- Below 60 per cent – starting from 2.59 per cent (2.87 per cent comparison rate);
- Below 70 per cent – starting from 2.64 per cent (2.92 per cent comparison rate);
- Below 80 per cent – starting from 2.74 per cent (3.02 per cent comparison rate).
Melissa Christy, 86 400’s lending product lead, said the tiered system could reduce variable loan rates for customers with more equity in their property, helping Australian mortgage holders do more with their money.
"With rates at an all-time low, it's a great time to refinance,” she said.
A borrower’s interest rate won’t automatically change as the LVR drops or increases. However, if a customer believes their LVR has changed based on their loan amount, they can get in touch with 86 400. If they believe the change is because their property’s value has increased, the lender would need to revalue the property.
The new variable rates came into effect from August 20, and apply to new and existing 86 400 customers.
Some of the lowest interest rates for owner-occupiers
|Lender||Loan type||Advertised rate (%)||Comparison rate (%)|
|Easy Street Financial Services||Variable||1.95||1.99|
|Homestar Finance||Fixed – 1-year||1.98||2.41|
|People's Choice Credit Union||Fixed – 1-year (first home buyers only)||1.99||3.91|
|Community First Credit Union||Fixed – 2-years||1.99||3.25|
|Bank First||Fixed – 3-years||1.99||3.1|