The best banks to consider for a home loan

ALASDAIR DUNCAN
If you’re in the property market and wondering how to determine the best bank to find a home loan deal, there are a number of key factors that could weigh into your decision.

Interest rates in Australia are at record low levels right now, which means that many banks and home loan lenders are offering a variety of deals to encourage new home buyers, refinancers and investors to sign up.

If you’re wondering what the best bank might be for you, then there are a number of questions to ask, including the rates they can offer you, the fees you might be charged, and the amount they might be willing to lend you.

Here, we’ll answer the questions:

Which bank is best for a home loan?

The best bank for a home loan or mortgage loan will depend on your particular needs and circumstances, taking into account your budget and whether you are a first home buyer, a refinancer or someone seeking to purchase an investment property.

To help Aussies find a good deal on home loans, Canstar gives out annual Home Loan Awards to the banks and lenders that offer outstanding value to customers. As part of the Awards, thousands of products are assessed based on the price offered to consumers (taking into account interest rates and fees), as well as the features.

Which bank home loan is cheaper?

There are a number of factors that can make home loans cheaper, and depending on the individual bank or lender, the three most important of these are the interest rates, fees and charges, and features of a loan.

Interest rates

When choosing a home loan, you can opt for a fixed interest rate, which will remain the same throughout the term of the loan, or a variable one, which will change along with the cash rate. You can also opt for a split loan, which is a combination of both.

Right now, the cash rate in Australia is low, meaning the current interest rates on home loans tend to be low. Canstar compares thousands of home loans from more than 80 lenders, so you can compare with us to find some of the lowest fixed and variable rates.

Fees and charges

As well as interest, home loans will typically come with fees and charges attached. Banks and lenders can charge both establishment and ongoing fees, and these will vary depending on who your home loan is with. The comparison rate of a home loan is designed to represent the total cost of a loan, taking into account interest rates, as well as fees and charges.

If you’re wondering about the best banks to consider for a home loan, you could weigh up differences between home loan products offered by various lenders using Canstar’s Home Loan Comparison Rate Calculator.

Features

Home loans can come with various features, such as an offset account, a redraw facility and even bundled credit cards. While it’s not always the case, in general terms, these features can make a loan more expensive in terms of fees and charges.

If you’re curious about the features available and the effect they might have on the price of a home loan, you can try Canstar’s Home Loan Comparison Rate Calculator to potentially find some of the best banks to consider.


Compare Home Loans with Canstar

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 $350,000 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 loans comparison selector to view a wider range of home loan products. Canstar may earn a fee for referrals.

*Comparison rate based on loan amount of $150,000 and a term of 25 years. Read the Comparison Rate Warning


What else can you consider when comparing banks for a home loan?

In this competitive market, Australia’s major banks typically offer deals to home buyers, refinancers and investors. Home loan deals can include discounts on lenders mortgage insurance, and cashback offers for refinancers.

Lenders mortgage insurance discounts

Lenders mortgage insurance (LMI) is a type of charge that is typically applied by banks and home loan lenders to borrowers who have a deposit of less than 20%. LMI can add tens of thousands of dollars to the cost of a home loan over the whole term, but there are some lenders who offer discounts to eligible borrowers.

According to Mortgage Choice, some lenders may offer to waive LMI for people in some professions like medicine and law, allowing them to pay just a 10% deposit without paying additional mortgage insurance. Mortgage Choice says that this is typically assessed on an individual basis, however, so if you are considering a bank for a home loan, it may be worth asking them if they can offer you any discounts or waivers on LMI.

There can also be LMI discounts for first home buyers. You can find out about first home buyer grants and concessions in your state or territory.

Refinance cashback offers

Some banks will offer incentives to customers wishing to refinance their home loan, offering a certain amount of cash back to borrowers if they switch home loans. Each month, Canstar publishes a list of home loan offers and deals from lenders on our database, and the cashback amount typically offered can be anywhere from $2,000 to $4,000.

Who are Australia’s big four banks?

The banking landscape in Australia is vast, but there are four major players typically referred to as the ‘big four banks’ – these are the Commonwealth Bank of Australia, National Australia Bank (NAB), Westpac Banking Corporation and the Australia and New Zealand Banking Group (ANZ).

If you’d like to know more about the major banks, Canstar has compared all four across a range of categories. While these are the major home loan lenders, there are a number of other banks and financial institutions that offer home loans in Australia. If you’re considering which lender best meets your needs, you can see Canstar’s list of home loan providers for further information.

How do you find and compare bank home loans?

If you are wondering about the best bank to consider for a home loan, you can compare home loans with Canstar to get you started. We compare more than 4,000 loans on features including the purpose of the loan (refinance, first home buyer and so on), the loan-to-value ratio (the size of the deposit you’ll need), and more.

 

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