Interest-only mortgages still available at historically low rates

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Borrowers are still able to access interest-only mortgages for less than 4 per cent, despite the crackdown on interest-only mortgages launched one year ago.

At least nine Australian lenders are offering interest-only mortgages with a ‘3’ in front of them, including CUA, Freedom Lend, Homestar Finance, Liberty, MyState, Southern Cross Credit Union, State Custodians, Suncorp Bank and QBank.

Southern Cross Credit Union charges interest-only borrowers as little as 3.68 per cent (comparison rate 3.69 per cent) for its Basic Home Loan (see table below).

Borrowers who favour using better-known home loan lenders, but still want sub-4 rates, can turn to Suncorp Bank for their interest-only mortgages.

Suncorp Bank offers its Back to Basics loan for 3.78 per cent (comparison rate 3.73 per cent) and its Home Package Plus First Home Buyer Special Offer for 3.89 per cent (comparison rate 3.84 per cent).

APRA, the banking regulator, recently reported that for new lending, the share of interest-only mortgages fell from 36.26 per cent in the March 2017 quarter to 15.22 per cent in the December 2017 quarter.

One reason for the sharp drop in interest-only mortgages is that home loan lenders have increased their interest-only home loan interest rates during the past year. Nevertheless, some Australian lenders continue to price their interest-only mortgages at historically low rates.

Lender Product Advertised rate Comparison rate
Southern Cross Credit Union Basic Home Loan 3.68% 3.69%
Homestar Finance Owner Occupied Home Loan 3.74% 3.78%
Suncorp Bank Back to Basics 3.78% 3.73%
QBank Classic Home Loan Special 3.78% 3.79%
State Custodians Low Rate Home Loan 3.79% 3.82%
Suncorp Bank Home Package Plus First Home Buyer Special Offer 3.89% 3.84%
Liberty Liberty Star 3.89% 4.20%
Freedom Lend Variable Interest Only 3.94% 3.70%
CUA Advance Variable 3.99% 3.69%
MyState Basic Variable 3.99% 3.83%

Please note that the cheapest interest-only home loan won’t necessarily be the best mortgage for borrowers.



^Words such as "top", "best", "cheapest" or "lowest" are not a recommendation or rating of products. This page compares a range of products from selected providers and not all products or providers are included in the comparison. There is no such thing as a 'one- size-fits-all' financial product. The best loan, credit card, superannuation account or bank account for you might not be the best choice for someone else. Before selecting any financial product you should read the fine print carefully, including the product disclosure statement, fact sheet or terms and conditions document and obtain professional financial advice on whether a product is right for you and your finances.

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