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Lowest rates from banks in the First Home Loan Deposit Scheme

Lowest rates from banks in the First Home Loan Deposit Scheme

The First Home Loan Deposit Scheme (FHLDS) is officially accepting applications, with 3,000 first home buyers already reserving a place as of 1 January, according to Domain data.

As of 10 January, 190 first home buyer applications have been pre-approved. They are mostly single buyers with a median income of around $68,000.

The FHLDS, which sees eligible first home buyers get home loan approval with deposits as little as 5 per cent, will be implemented by 27 Australian lenders. Read more about how the First Home Loan Deposit Scheme works.

What do the experts think?

Minister for Housing, Michael Sukkar, boasted that the scheme will make home ownership “a reality for more Australians”.

“This Scheme is a fantastic way of helping even more customers, allowing them to potentially save thousands of dollars on their mortgage,” he said.

Domain economist Trent Wiltshire warned that although the scheme will be helpful for some individual buyers, it was not a “silver bullet” to improve affordability.

“I think the scheme will put a little bit of upward pressure on prices at the lower to middle end,” he said.

“Any impact when prices are rising quickly is not ideal.”

Further, a recent Domain article noted that Mr Wiltshire expects first-home buyers to be “active in 2020, trying to get into the expensive Sydney market before rebounding prices rise too much, and take advantage of low interest rates”.

Sally Tindall, research director at RateCity, said while the program will help people avoid costly lenders mortgage insurance, which can run into the tens of thousands of dollars, first home buyers should consider the scheme cautiously.

“Just because the government is encouraging people to borrow with as little as a 5 per cent deposit doesn’t necessarily make it a great idea,” she said.

“People that borrow with a wafer-thin deposit might get into the property market faster, but they’re likely to make higher monthly repayments and shell out tens of thousands in extra interest over the life of the loan.

“If you are thinking about signing up to this scheme, go in with your eyes wide open because it’s peppered with potential drawbacks.

What home loan rates are on offer?

The National Housing Finance and Investment Corporation (NHFIC) is the government body administering the FHLDS.

Fiona Benson of the NHFIC has stated that “all participating lenders are supporting the Scheme by not charging eligible customers higher interest rates than equivalent customers outside of the Scheme”.

If you are considering taking up the FHLDS, it’s still crucial you compare your options and weigh up the pros and cons. Just because a lender could approve your home loan, doesn’t mean that home loan is the most competitive one for your financial needs.

A small home loan deposit also comes with its own set of risks, including:

  • If property prices fall by more than 5 per cent, you could find yourself in negative equity; and
  • When home loan rates rise again, the impact could really sting your budget.

With all of this in mind, these are the lowest rates being offered by the approved lenders for the FHLDS. These rates may not be what first home buyers are offered but can be a helpful starting point to familiarise yourself with the rates potentially on offer.

Lowest rates offered by approved lenders

Approved lendersLowest owner-occupier variable rateComparison rate
Australian Military Bank

3.31%

3.32%

Auswide Bank

3.09%

3.50%

Bank Australia

3.18%

3.55%

Bank First

3.19%

3.24%

Bank of us

3.18%

3.20%

Bendigo Bank

3.14%

3.31%

Beyond Bank Australia

3.15%

3.56%

Commonwealth Bank of Australia

3.22%

3.23%

Community First Credit Union

3.75%

3.82%

CUA

2.98% (Loan > 500K)

3.03%

Defence Bank

3.36%

3.36%

G&C Mutual Bank

2.79%

2.79%

Gateway Bank

3.01%

3.09%

Indigenous Business Australia

From 2.00% (depending on Gross Income)

-

Mortgageport

2.99%

3.05%

MyState Bank

3.08%

3.11%

National Australia Bank

3.09%

3.09%

P&N Bank

3.17%

3.17%

People’s Choice Credit Union

2.99%

2.99%

Police Bank (including the Border Bank and Bank of Heritage Isle)

3.18%

3.26%

QBANK

3.04%

3.07%

Queensland Country Credit Union

3.39%

3.79%

Regional Australia Bank

3.31%

3.75%

Sydney Mutual Bank and Endeavour Mutual Bank (divisions of Australian Mutual Bank Ltd)

3.22%

3.25%

Teachers Mutual Bank Limited (including Firefighters Mutual Bank, Health Professionals Bank, Teachers Mutual Bank and UniBank)

3.29%

3.34%

The Mutual Bank

3.73%

4.13%

WAW Credit Union

3.44%

3.49%

Source: RateCity.com.au

Note: Figures show lowest variable owner-occupier home loan rates. Data accurate as at 8 January.

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This article was reviewed by Personal Finance Editor Mark Bristow before it was published as part of RateCity's Fact Check process.

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Learn more about home loans

How can I apply for a first home buyers loan with Commonwealth Bank?

Getting a home loan requires planning and research. If you are considering a home loan with the Commonwealth Bank, you can find the information you need in the buying your first home section of the bank’s website.

You can see the steps you should take before applying for the loan and use the calculators to work out how much you can borrow, what your monthly repayments would be and the upfront costs you’d likely pay.

You can also book a time with a Commonwealth first home loan specialist by calling 13 2221.

CommBank publishes a property report that may help you understand the real estate market. The bank has also created a CommBank Property App that you can use to search for property.  The link to download this app is available on the same webpage.

If you are eligible for the First Home Loan Deposit Scheme, CommBank will help you process your application. The scheme helps first home buyers to purchase a home with a low deposit. You can read details about this scheme here and speak with a CommBank home lending specialist to understand your options.

How to apply for a pre-approval home loan from Bendigo Bank?

Applying for pre-approval on your home loan gives you confidence in your ability to secure finance while looking at potential new homes. You can get a free and personalised pre-approval home loan from Bendigo Bank in just a few minutes, without any credit checks or paperwork. 

Bendigo Bank offers pre-approval for home loans that allow you to understand the home loan size you may be able to get before looking for a new home. 

With the pre-approval, Bendigo Bank provides an estimate of your borrowing power. This figure incorporates stamp duty, lenders mortgage insurance (LMI) and any first home buyer incentives you may be eligible for. You may also qualify for the First Home Loan Deposit Scheme initiative, depending on your circumstances. 

To apply for a pre-approval on your home loan from Bendigo Bank, all you need to do is fill in a smart form. You could also contact the bank directly on 1300 236 344.

Can first home buyers apply for an ING home loan?

First home buyers can apply for an ING home loan, but first, they need to select the most suitable home loan product and calculate the initial deposit on their home loan. 

First-time buyers can also use ING’s online tool to estimate the amount they can borrow. ING offers home loan applicants a free property report to look up property value estimates. 

First home loan applicants struggling to understand the terms used may consider looking up ING’s first home buyer guide. Once the home buyer is ready to apply for the loan, they can complete an online application or call ING at 1800 100 258 during regular business hours.

Can I get a NAB first home loan?

The First Home Loan Deposit Scheme of NAB helps first home buyers purchase a property sooner by reducing the upfront costs required. This scheme is offered based on a Government-backed initiative, with10,000 available places announced in October 2020.

Suppose your application for the NAB first home buyer loan is successful. In that case, you’ll only need to pay a low deposit, between 5 and 20 per cent of the property value and won’t be asked to pay lender's mortgage insurance (LMI). You’ll also receive a limited guarantee from the Australian government to purchase the property.

If you’re applying for the NAB first home buyer home loan as an individual, you need to have earned less than $125,000 in the last financial year. Couples applying for the NAB first home loan need to have earned less than $200,000 to be eligible. To be considered a couple, you need to be married or in a de facto relationship. A parent and child, siblings or friends are not considered a couple when applying for a NAB first home loan.

The NAB First Home Loan Deposit Scheme is currently offered only to purchase a brand new property, rather than an established property.

How do I apply for a home loan pre-approval from Commonwealth Bank?

To apply for a Commbank home loan pre-approval, you can either call the bank at 13 2224 or meet one of the bank’s lending specialists. You can set up a meeting online if you wish. You’ll need to do some homework before contacting the bank, such as gathering information on the kind of properties you’d like to buy and their prices.

Preparing a financial summary, which lists all your income sources as well as significant expenses, can also help determine how much you can afford to borrow. You may also want to check your credit score before applying for pre-approval.

It’s worth remembering that a CBA home loan pre-approval doesn’t guarantee that you’ll get the loan. Once you get the pre-approval, you’ll have about three to six months to decide on a property and apply for the home loan. The bank will then confirm that the property is suitable for the loan before fully approving it.

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.

When does Commonwealth Bank charge an early exit fee?

When you take out a fixed interest home loan with the Commonwealth Bank, you’re able to lock the interest for a particular period. If the rates change during this period, your repayments remain unchanged. If you break the loan during the fixed interest period, you’ll have to pay the Commonwealth Bank home loan early exit fee and an administrative fee.

The Early Repayment Adjustment (ERA) and Administrative fees are applicable in the following instances:

  • If you switch your loan from fixed interest to variable rate
  • When you apply for a top-up home loan
  • If you repay over and above the annual threshold limit, which is $10,000 per year during the fixed interest period
  • When you prepay the entire outstanding loan balance before the end of the fixed interest duration.

The fee calculation depends on the interest rates, the amount you’ve repaid and the loan size. You can contact the lender to understand more about what you may have to pay. 

Where can I get all the information about an ANZ first home buyer’s loan?

As a first home buyer, you may require help and hand-holding, and as such ANZ has the buying your first home section on its website full of important information. ANZ also has a form in this section you can fill out to get a free consultation from an ANZ First Home Coach and create your own plan for buying your first home. This coach will help you understand where your current income is being spent and plan for your home loan repayments. You’ll get a clear picture of the costs involved in purchasing a property and how to budget or save for these costs. The coach will help you understand different deposit options and manage your accounts to enhance your savings.

There are three types of ANZ first home loans - Standard Variable, Fixed, and Equity Manager. The features, interest rates, and terms for each are different, and you can compare them here.

When they apply for an ANZ home loan, first home buyers can also get guidance on applying for the First Home Owner Grant (FHOG). This is a one-off government grant that may be available to you when you’re buying your first home. The eligibility criteria for FHOG differs between the different states and territories, which is why it’s helpful to have expert advice when applying.

How much deposit do I need for a home loan from ANZ?

Like other mortgage lenders, ANZ often prefers a home loan deposit of 20 per cent or more of the property value when you’re applying for a home loan. It may be possible to get a home loan with a smaller deposit of 10 per cent or even 5 per cent, but there are a few reasons to consider saving a larger deposit if possible:

  • A larger deposit tells a lender that you’re a great saver, which could help increase the chances of your home loan application getting approved.
  • The more money you pay as a deposit, the less you’ll have to borrow in your home loan. This could mean paying off your loan sooner, and being charged less total interest.
  • If your deposit is less than 20 per cent of the property value, you might incur additional costs, such as Lenders Mortgage Insurance (LMI).

What is a variable home loan?

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.

How do I apply for Westpac’s first home buyer loan?

If you’re a first home buyer looking to apply for a home loan with Westpac, they offer an online home loan application. They suggest the application can be completed in about 20 minutes. Based on the information you provide, Westpac will advise you the amount you can borrow and the costs associated with any possible home loan. 

You can use Westpac’s online mortgage calculators to estimate your borrowing power. You can also work out the time it might take to save up for the deposit, and the size of your home loan repayments

When applying for a home loan with Westpac, you’re assigned a home finance manager who can address your concerns and provide information. The manager will also offer guidance on any government grants you may be eligible for. 

Who offers 40 year mortgages?

Home loans spanning 40 years are offered by select lenders, though the loan period is much longer than a standard 30-year home loan. You're more likely to find a maximum of 35 years, such as is the case with Teacher’s Mutual Bank

Currently, 40 year home loan lenders in Australia include AlphaBeta Money, BCU, G&C Mutual Bank, Pepper, and Sydney Mutual Bank.

Even though these lengthier loans 35 to 40 year loans do exist on the market, they are not overwhelmingly popular, as the extra interest you pay compared to a 30-year loan can be over $100,000 or more.

When do mortgage payments start after settlement?

Generally speaking, your first mortgage payment falls due one month after the settlement date. However, this may vary based on your mortgage terms. You can check the exact date by contacting your lender.

Usually your settlement agent will meet the seller’s representatives to exchange documents at an agreed place and time. The balance purchase price is paid to the seller. The lender will register a mortgage against your title and give you the funds to purchase the new home.

Once the settlement process is complete, the lender allows you to draw down the loan. The loan amount is debited from your loan account. As soon as the settlement paperwork is sorted, you can collect the keys to your new home and work your way through the moving-in checklist.

What are the benefits of getting a pre-approved home loan from Citibank?

While hunting for your dream home, getting a Citibank home loan pre-approval can have multiple benefits, which include:

  • You'll have an idea on your personal price range, which can save time to find your home.
  • With a pre-approved home loan, you may find yourself with more financial control to better decide how much you can spend.
  • A Citibank pre-approved home loan is a commitment  by a lender that signals you're ready to jump into the property market.

You can apply for pre-approval by providing basic details, such as name, email, and phone number on the bank’s website. Alternatively, you can contact the bank on 1300 361 922 or find a home lending officer on the website.