Homestar Finance has announced a new ongoing variable rate of just 1.79 per cent on the eve of a potential RBA cut.
This is now the lowest ongoing variable mortgage rate in Australia.
Homestar Finance Star Gold loan
- Rate: 1.79% ongoing variable, 1.84% comparison rate
- Fees: $911 upfront, $0 ongoing
- Conditions: owner occupiers paying principal and interest, 60% loan to value ratio, loans up to $850,000.
How much the average borrower could save by refinancing (including switch costs)
A typical borrower with $400k loan balance who refinances to Homestar could potentially save $4,290 in the first year, or $25,287 over five years.
This is significantly more than a refinancer who switches to the average new customer rate of 2.69 per cent, as recorded by the RBA (see table below).
Potential savings by refinancing a $400k loan
|Switch to Homestar rate||Switch to av. new cust. rate|
Notes: based on an owner occupier paying P&I with a $400K balance outstanding 5 years into a 30 year loan. Switching from the average existing customer rate of 3.19% to the average new customer rate of 2.69%, according to the RBA. Based on interest paid and fees. Fees include discharge fee from old lender and upfront fees from new lender but not government switching fees.
Sally Tindall, research director at RateCity.com.au, said lenders were neck-and-neck in the race to have the lowest rate.
“At 1.79 per cent, this is now the lowest home loan rate available in Australia, but with an RBA cut potentially just hours away rates are likely to keep on falling,” she said.
“Lenders are leap-frogging under each other to take out the title of the lowest rate loan. We aren’t at the bottom just yet.
“The big question is whether the banks will pass on an RBA cut to their existing customers.
"There are a lot of mortgage holders who aren’t in a position to refinance. Right now they can only dream of having a rate that starts with a 2, let alone a 1,” she said.
Sharpest loans for people with the biggest deposits
RateCity analysis shows 20 lenders offer discounted rates for people who have a loan to value ratio of 60 per cent, including St George, Bank of Melbourne and Macquarie.
“Many homeowners might not know they are eligible for these rock-bottom rates,” she said.
“If you’ve been paying down your loan for more than five years, and your property’s gone up in value, there’s a chance you might qualify.
“Check the vitals on your home loan – your rate, how much you owe and how much your property is worth. If you haven’t refinanced for a few years, you’ll be amazed at what lenders are willing to offer,” she said.
How does this 1.79 per cent rate compare?
Lowest ongoing variable rates on RateCity.com.au
|Reduce Home Loans|
|Pacific Mortgage Group|
|Well Home Loans|
Lowest owner-occupier home loan rates on RateCity.com.au
|1-year fixed||Reduce Home Loans|
|2-year fixed||Illawarra Credit Union|
|3-year fixed||Bank First/ Hume Bank|
|5-year fixed||Citi Bank|
Big four banks’ lowest home loan rates
|2-yr fixed||3-yr fixed|
2.19% for 2 yrs then 2.69%
Note: Applications for the Homestar Finance Star Gold loan must be made by 31st December 2020 and loans settled by 31st March 2021.