The Reserve Bank surprised some commentators in August 2016 by cutting the official cash rate by 25 basis points, to a historic low of just 1.50%. For mortgage holders this is no doubt cause for celebration – but the real message for borrowers is to give yourself your own rate cut by being assertive and negotiating. (For tips for how to negotiate a better interest rate, click here.)
Cash rate cut means plenty of cheap home loan rates
Why do you need to shop around and negotiate fiercely? Well, currently on Canstar’s database, the difference between the highest and lowest variable home loan rates for owner occupiers is a huge 2.34% p.a..
Just half a percent difference on a $350,000 loan (over a 25-year term) could potentially reduce the monthly repayments by around $100. For example, a loan of that amount on the average standard variable interest rate on our database of 4.50% costs $1,945/month, compared to half a percent less at 4.00%, which costs $1,847/month (Canstar Repayments Calculator). That’s money that’s better off in your pocket.
Investors don’t miss out either, with a 2.28% p.a. difference between highest and lowest variable interest rates on Canstar’s database for property investment loans.
Try our home loan repayments calculator to see how much you could save on your home loan.
What are the current, average home loan interest rates?
Thanks to the August official cash rate cut, home loan interest rates super-low. Currently on Canstar’s database of home loans, minimum, maximum and average advertised home loan rates are as follows:
| Residential Home Loan Market Snapshot 20-03-2017 | |||||||
|---|---|---|---|---|---|---|---|
| Stat | Basic Variable | Standard Variable | 1 Year Fixed | 2 Year Fixed | 3 Year Fixed | 4 Year Fixed | 5 Year Fixed |
| Average | 4.25% | 4.47% | 4.17% | 4.08% | 4.15% | 4.51% | 4.57% |
| Min | 3.69% | 3.39% | 3.69% | 3.59% | 3.59% | 3.75% | 4.04% |
| Max | 5.37% | 5.73% | 5.04% | 4.95% | 5.05% | 4.94% | 5.14% |
Source: www.canstar.com.au
The search results do not include all home loan providers, and may not include all features relevant to you. Based on residential loans available for $350,000, 80% LVR and principal and interest repayments.
| Investment Home Loan Market Snapshot 20-03-2017 | |||||||
|---|---|---|---|---|---|---|---|
| Stat | Basic Variable | Standard Variable | 1 Year Fixed | 2 Year Fixed | 3 Year Fixed | 4 Year Fixed | 5 Year Fixed |
| Average | 4.50% | 4.72% | 4.37% | 4.29% | 4.34% | 4.73% | 4.74% |
| Min | 3.69% | 3.67% | 3.69% | 3.70% | 3.69% | 3.75% | 4.10% |
| Max | 5.65% | 5.87% | 5.04% | 5.09% | 5.09% | 5.06% | 5.24% |
Source: www.canstar.com.au
The search results do not include all home loan providers, and may not include all features relevant to you. Based on investment loans available for $350,000, 80% LVR and principal and interest repayments.
What home loan interest rates could you negotiate?
Both owner occupiers and investors who have some home equity or savings built up (and who have a good credit rating) should be able to negotiate a relatively low home loan interest.
Banks and smaller lending institutions have been feeling the pinch over the past year as competitiveness increases. The competitiveness is evident in recent times; banking institution’s as big as NAB have introduced their lowest rate to date specifically aimed at first home buyers.
In the variable space over the past year, we have seen some incredibly large pricing adjustments. The St.George group (consisting of St.George Bank, Bank of Melbourne, and BankSA) decreased rates by up to 1.03%, down to 4.08% p.a. for their Basic Promo Variable P&I product (comparison rate 4.09%*).
Smaller institutions such as SCU have decreased rates by 1.04% to 3.77% p.a. on their Basic Home Loan (comparison rate 3.81%*).
These institutions are not alone in the battle to attract customers across the market. A total of 9 institutions have reduced their residential variable rates by more than 0.50% over the past year.
Fixed home loan rates also historically low
Those choosing a fixed-rate mortgage can also lock in historically low rates. At the moment, as the tables above show, we’re seeing fixed home loan rates under 4.00% p.a. across the board – right up to a 5-year fixed term.
A fixed rate can be terrific for home buyers, although perhaps a sobering indication of what economic performance our large financial institutions are predicting for Australia over the next few years. It might be worth refreshing our memories as to what caused the GFC.
Still, if you’re a good credit risk and you have some equity, your financial institution will most likely be willing to negotiate. The key is being prepared before you talk to your bank:
- Get a copy of your credit report, so that you know what’s on it and where you stand in terms of being viewed as a high risk or low risk borrower.
- If you need to, here are some ways to potentially improve your credit rating.
- Do your research to find out what rates are available from other institutions – you can compare home loans using our website.
- Once you know what your other options are, give your lender a call and follow our interest rate negotiation tips. You might be surprised how much you could save.
For more information on how Canstar researches and rates home loans, read the ratings Methodology for our latest star ratings report:
If you’re currently considering a home loan, the comparison table below displays some of the variable rate home loans on our database with links to lenders’ websites that are available for first home buyers. This table is sorted by Star Rating (highest to lowest), followed by comparison rate (lowest-highest). Products shown are principal and interest home loans available for a loan amount of $350K in NSW with an LVR of 80% of the property value.
Before committing to a particular home loan product, check upfront with your lender and read the applicable loan documentation to confirm whether the terms of the loan meet your needs and repayment capacity. Use Canstar’s home loan selector to view a wider range of home loan products.
*Comparison rate based on loan amount of $150,000 and a term of 25 years. Read the Comparison Rate Warning.
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