Does your home loan rate start with a '1'? Bank of us takes the lead in rate race

A customer-owned bank has just made history, becoming the first-ever lender on Canstar’s database to offer home loan interest rates below 2%. Here’s where you can find the new record-low rates.

Tasmanian-based lender Bank of us just introduced special offer interest rates on its one-year, two-year and three-year fixed home loans for owner-occupiers, available for a limited time to new customers who are Tasmanian residents from Tuesday, 30 June.

The changes bring the bank’s interest rates for those with a loan-to-value ratio (LVR) of up to 80% down to:

• One-year fixed special offer reduced to 1.99% (comparison rate 2.78%): 0.60 percentage point cut
• Two-year fixed special offer reduced to 1.99% (comparison rate 2.71%): 0.60 percentage point cut
• New three-year fixed special offer at 1.99% (comparison rate 2.64%)
• Variable rate reduced to 2.83% (comparison rate 2.85%): 0.10 percentage point cut

Canstar finance expert Steve Mickenbecker said now that rates have cracked the 2% barrier, the savings on offer to homeowners were the biggest we’ve seen yet.

“Switching from the average variable rate of 3.47% to a 1.99% fixed rate on an average $400,000 loan could put $313 per month or over $3,700 a year back in borrowers’ wallets,” Mr Mickenbecker said.

The new Bank of us rates came hot on the heels of recent rate cuts by lenders such as Freedom Lend and Reduce Home Loans, while ING went against the tide and hiked fixed rates for its customers, although it did lower variable rates later in the week.

Bank of us will be the first lender on Canstar’s home loan database to introduce rates below 2%.

None of Australia’s four major banks – Commonwealth Bank, ANZ, National Australia Bank or Westpac – currently offer home loan interest rates at this record-low price.