Home loan market shows signs of life as variable rates hit 1.95%

Home loan market shows signs of life as variable rates hit 1.95%

New home lending has partially recovered from its record drop last month according to ABS figures released today. It comes as home loan rates keep on tumbling, with a new lowest ongoing variable rate of 1.95 per cent now on the market.

ABS Lending Indicators

The latest ABS figures show the value of new lending rose by 6.2 per cent in the month of June, on the back of a record drop in May. When compared to pre-COVID conditions (February), new lending still recorded a drop of 10.4 per cent, in seasonally adjusted terms.

The number of people refinancing fell 11.1 per cent month-on-month on the back of a record rise in May. However, compared to February, refinancing was up 23.8 per cent, and rose 52.1 per cent compared to June last year.

Value of new loans   % change % change
June-20 May 2020 – Jun 2020 Jun 2019 – Jun 2020
Total housing  

$1.01 billion

$747.40 million

$17.43 billion

6.18%

4.48%

Owner occupiers

 

$679.80 million

$1.03 billion

$12.99 billion

5.52%

8.65%

Investors

 

$333.9 million

-$287.40 million

$4.44 billion

8.14%

-6.09%

Notes: Seasonally adjusted figures. Figures exclude refinancing.

Source: ABS lending indicator statistics for June 2020, released 5 August 2020.

External refinancing   % change % change
June-20 May 2020 – Jun 2020 Jun 2019 – Jun 2020
Number

19,327

-11.05%

52.11%

Value

$8.90 billion

-11.90%

73.99%

Notes: Based on the number and value of new loans to owner occupiers using seasonally adjusted figures.

Source: ABS lending indicator statistics for June 2020, released 5 August 2020.

The data from June largely reflects changes in the home lending market in May as new sales typically take six weeks to settle.

RateCity research director, Sally Tindall, said the increase in new lending this month showed there was still signs of life in the property market despite the turmoil however the outlook was still uncertain.

“Last month we saw the biggest drop in new lending on record as a result of the nation being in lockdown,” she said.

“It’s not surprising to see new lending has bounced back in June, as restrictions began to lift on auctions and open homes in May. However, with Victoria back in lockdown, and hundreds of new COVID-19 cases emerging every day, the longer-term trend for the housing market is still likely to be down.

Ongoing variable rates hit 1.95%

Low cost lender, Easy Street Financial, has undercut its competitors with an ongoing variable rate of 1.95 per cent, and a comparison rate of 1.99 per cent.

The rate is available for owner-occupiers paying principal and interest on loans of $750,000 or more, with a deposit of 20 per cent or more.

Sally Tindall, research director at RateCity.com.au, said: “Home loan rates keep on falling as the low-cost lenders chase each other under the 2 per cent barrier.”

“It’s unusual to see this many rate cuts when the RBA hasn’t, and isn’t likely to move rates anytime soon. Yet every week records are broken.

“This competition between the banks is motivating people to switch lenders. Today’s ABS figures show a 73 per cent increase in external refinances from June last year.

“There are now four home loan lenders offering at least one rate under 2 per cent and the list is growing every week,” she said.

Lowest rates on the RateCity database

Lowest ongoing variable rates

Lender Advertised rate
EasyStreet (loans over $750K)

1.95%

Reduce Home Loans

2.19%

Homestar Finance

2.29%

Lowest 1-year fixed rates 

Lender Advertised rate
Homestar Finance

1.98%

Greater Bank

2.09%

UBank

2.14%

Lowest 2-year fixed rates

Lender Advertised rate
Community First Credit Union

1.99%

Homestar Finance

2.06%

HSBC

2.09%

Lowest 3-year fixed rates 

Lender Advertised rate
UBank

2.14%

BCU

2.16%

Macquarie Bank, Westpac

2.19%

Notes: above rates are for owner-occupiers paying principal and interest.

Did you find this helpful? Why not share this news?

Advertisement

RateCity

Money Health Newsletter

Subscribe for news, tips and expert opinions to help you make smarter financial decisions

By signing up, you agree to the ratecity.com.au Privacy & Cookies Policy and Terms of Use, Disclaimer & Privacy Policy

Advertisement

Learn more about home loans

How much information is required to get a rating?

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.

How can I get a home loan with no deposit?

Following the Global Financial Crisis, no-deposit loans, as they once used to be known, have largely been removed from the market. Now, if you wish to enter the market with no deposit, you will require a property of your own to secure a loan against or the assistance of a guarantor.

What is the average annual percentage rate?

Also known as the comparison rate, or sometimes the ‘true rate’ of a loan, the average annual percentage rate (AAPR) is used to indicate the overall cost of a loan after considering all the fees, charges and other factors, such as introductory offers and honeymoon rates.

The AAPR is calculated based on a standardised loan amount and loan term, and doesn’t include any extra non-standard charges.

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.

Why is it important to get the most up-to-date information?

The mortgage market changes constantly. Every week, new products get launched and existing products get tweaked. Yet many ratings and awards systems rank products annually or biannually.

We update our product data as soon as possible when lenders make changes, so if a bank hikes its interest rates or changes its product, the system will quickly re-evaluate it.

Nobody wants to read a weather forecast that is six months old, and the same is true for home loan comparisons.

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.

How does a redraw facility work?

A redraw facility attached to your loan allows you to borrow back any additional repayments that you have already paid on your loan. This can be a beneficial feature because, by paying down the principal with additional repayments, you will be charged less interest. However you will still be able to access the extra money when needed.

Can I take a personal loan after a home loan?

Are you struggling to pay the deposit for your dream home? A personal loan can help you pay the deposit. The question that may arise in your mind is can I take a home loan after a personal loan, or can you take a personal loan at the same time as a home loan, as it is. The answer is that, yes, provided you can meet the general eligibility criteria for both a personal loan and a home loan, your application should be approved. Those eligibility criteria may include:

  • Higher-income to show repayment capability for both the loans
  • Clear credit history with no delays in bill payments or defaults on debts
  • Zero or minimal current outstanding debt
  • Some amount of savings
  • Proven rent history will be positively perceived by the lenders

A personal loan after or during a home loan may impact serviceability, however, as the numbers can seriously add up. Every loan you avail of increases your monthly installments and the amount you use to repay the personal loan will be considered to lower the money available for the repayment of your home loan.

As to whether you can get a personal loan after your home loan, the answer is a very likely "yes", though it does come with a caveat: as long as you can show sufficient income to repay both the loans on time, you should be able to get that personal loan approved. A personal loan can also help to improve your credit score showing financial discipline and responsibility, which may benefit you with more favorable terms for your home loan.

How personalised is my rating?

Real Time Ratings produces instant scores for loan products and updates them based what you tell us about what you’re looking for in a loan. In that sense, we believe the ratings are as close as you get to personalised; the more you tell us, the more we customise to ratings to your needs. Some borrowers value flexibility, while others want the lowest cost loan. Your preferences will be reflected in the rating. 

We also take a shorter term, more realistic view of how long borrowers hold onto their loan, which gives you a better idea about the true borrowing costs. We take your loan details and calculate how much each of the relevent loans would cost you on average each month over the next five years. We assess the overall flexibility of each loan and give you an easy indication of which ones are likely to adjust to your needs over time. 

How often is your data updated?

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

What is a valuation and valuation fee?

A valuation is an assessment of what your home is worth, calculated by a professional valuer. A valuation report is typically required whenever a property is bought, sold or refinanced. The valuation fee is paid to cover the cost of preparing a valuation report.

What is a redraw fee?

Redraw fees are charged by your lender when you want to take money you have already paid into your mortgage back out. Typically, banks will only allow you to take money out of your loan if you have a redraw facility attached to your loan, and the money you are taking out is part of any additional repayments you’ve made. The average redraw fee is around $19 however there are plenty of lenders who include a number of fee-free redraws a year. Tip: Negative-gearers beware – any money redrawn is often treated as new borrowing for tax purposes, so there may be limits on how you can use it if you want to maximise your tax deduction.

Mortgage Calculator, Loan Results

These are the loans that may be suitable, based on your pre-selected criteria. 

Mortgage Calculator, Repayment Type

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