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ING counters the big banks with its own rate cuts

ING counters the big banks with its own rate cuts

Australia’s fifth largest home loan lender, ING, has today dropped rates on several fixed home loans by up to 0.19 per cent.

The rate cuts affect ING’s 2, 3 and 5-year fixed home loans for owner-occupier customers paying principal and interest. 

RateCity data shows almost half of all leaders have cut fixed rates on over 500 products since the beginning of the year. 

Sally Tindall, research director at RateCity.com.au, said today’s move from ING came on the back of fixed rate cuts from three of the big four banks over the last two weeks. 

“Now that CBA, Westpac, NAB and ING have slashed fixed rates in recent weeks, other lenders may be forced to consider cutting their rates to maintain a competitive edge,” she said. 

“In particular, all eyes are on ANZ who currently has the highest 3 and 5 year fixed rates out of the big banks for owner occupiers paying principal and interest.”

ING fixed rate changes – owner-occupier rates, principal-and-interest repayments

ProductNew rateOld rateChange
Orange Advantage – 2 years3.59%3.75%-0.16%
Orange Advantage – 3 years3.64%3.83%-0.19%
Orange Advantage – 5 years3.99%4.09%-0.10%

Lowest fixed rates – major banks

Fixed periodCBAWestpacNABANZ
2 years3.79%3.79%3.69%*3.75%
3 years3.79%3.69%*3.79%3.99%
5 years4.09%4.09%4.09%4.19%

* First home buyer special

Lowest fixed rates – low-rate lenders

Fixed periodLenderInterest rate
2 yearsMortgage House3.57%
3 yearsSuncorp Bank3.49%
5 yearsGreater Bank3.74%

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Fact Checked -

This article was reviewed by Research Director Sally Tindall before it was published as part of RateCity's Fact Check process.

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Learn more about home loans

What is the difference between fixed, variable and split rates?

Fixed rate

A fixed rate home loan is a loan where the interest rate is set for a certain amount of time, usually between one and 15 years. The advantage of a fixed rate is that you know exactly how much your repayments will be for the duration of the fixed term. There are some disadvantages to fixing that you need to be aware of. Some products won’t let you make extra repayments, or offer tools such as an offset account to help you reduce your interest, while others will charge a significant break fee if you decide to terminate the loan before the fixed period finishes.

Variable rate

A variable rate home loan is one where the interest rate can and will change over the course of your loan. The rate is determined by your lender, not the Reserve Bank of Australia, so while the cash rate might go down, your bank may decide not to follow suit, although they do broadly follow market conditions. One of the upsides of variable rates is that they are typically more flexible than their fixed rate counterparts which means that a lot of these products will let you make extra repayments and offer features such as offset accounts.

Split rates home loans

A split loan lets you fix a portion of your loan, and leave the remainder on a variable rate so you get a bet each way on fixed and variable rates. A split loan is a good option for someone who wants the peace of mind that regular repayments can provide but still wants to retain some of the additional features variable loans typically provide such as an offset account. Of course, with most things in life, split loans are still a trade-off. If the variable rate goes down, for example, the lower interest rates will only apply to the section that you didn’t fix.

What is a fixed home loan?

A fixed rate home loan is a loan where the interest rate is set for a certain amount of time, usually between one and 15 years. The advantage of a fixed rate is that you know exactly how much your repayments will be for the duration of the fixed term. There are some disadvantages to fixing that you need to be aware of. Some products won’t let you make extra repayments, or offer tools such as an offset account to help you reduce your interest, while others will charge a significant break fee if you decide to terminate the loan before the fixed period finishes.

Why does Westpac charge an early termination fee for home loans?

The Westpac home loan early termination fee or break cost is applicable if you have a fixed rate home loan and repay part of or the whole outstanding amount before the fixed period ends. If you’re switching between products before the fixed period ends, you’ll pay a switching break cost and an administrative fee. 

The Westpac home loan early termination fee may not apply if you repay an amount below the prepayment threshold. The prepayment threshold is the amount Westpac allows you to repay during the fixed period outside your regular repayments.

Westpac charges this fee because when you take out a home loan, the bank borrows the funds with wholesale rates available to banks and lenders. Westpac will then work out your interest rate based on you making regular repayments for a fixed period. If you repay before this period ends, the lender may incur a loss if there is any change in the wholesale rate of interest.

Cash or mortgage – which is more suitable to buy an investment property?

Deciding whether to buy an investment property with cash or a mortgage is a matter or personal choice and will often depend on your financial situation. Using cash may seem logical if you have the money in reserve and it can allow you to later use the equity in your home. However, there may be other factors to think about, such as whether there are other debts to pay down and whether it will tie up all of your spare cash. Again, it’s a personal choice and may be worth seeking personal advice.

A mortgage is a popular option for people who don’t have enough cash in the bank to pay for an investment property. Sometimes when you take out a mortgage you can offset your loan interest against the rental income you may earn. The rental income can also help to pay down the loan.