First Home Loan Deposit Scheme banks: lowest variable loan rate from each lender revealed

Digital Editor · 24 February 2020

House hunters who initially missed out on a place in phase one of a new fee-slashing government first home ownership scheme now have a second chance. A further 7,000 places have been released, this time accessible through more banks. But which lenders are offering the lowest loan interest rates? We take a look.

A woman looking at her phone and writing in a journal with a calculator on the desk and a bike in the background.
Source: WAYHOME studio (Shutterstock)

In its first month, 3,000 keen first-time home buyers were granted a coveted reserved spot on the Federal Government’s First Home Loan Deposit Scheme (FHLDS). The scheme, which began on 1 January, 2020, can help reduce loan set-up costs for successful applicants by replacing the need to pay Lender’s Mortgage Insurance (LMI) for loans that are part of the scheme, potentially saving an eligible buyer thousands of dollars and allowing them to buy their first home with as little as a 5% deposit. Typically buyers need a deposit of at least 20% to avoid paying LMI.

Those first 3,000 places were released via two of the scheme’s approved lenders, Commonwealth Bank (CBA) and National Australia Bank (NAB).  A further 7,000 places were released via 27 participating lenders (including CBA and NAB) on 1 February. See a list of participating lenders, as well as eligibility and other criteria. The next release after that will be on 1 July, the spokesperson said, when the 2020-21 financial year places – another 10,000 – are made available.  

However, it is possible that some of the 2019-20 reserved places may again become available to other candidates, if applicants failed to meet the conditions of the scheme. 

“An eligible borrower has 10 days after gaining a reserved place in the scheme to get finance pre-approval from a participating lender,” the spokesperson said. “They then have 90 days to buy a property. The 90 days gives them the time to buy and settle on a property.” 

Canstar finance expert Steve Mickenbecker said prospective scheme applicants should do their homework and think carefully about whether the scheme is right for them. 

“First home buyers should still consider if they can afford a loan,” Mr Mickenbecker said. “And it’s important not to overstretch, too, as repayments will increase if interest rates go up. 

“Applicants should be comparing rates offered through the scheme to those rates available in the wider marketplace – Canstar has 4,000-plus loans on our database so it’s a great reference point. If a rate looks relatively expensive compared to other rates offered by that lender – or any lender – on the Canstar site, then perhaps you should be asking your bank for a better rate.”

According to the scheme rules, lenders cannot charge participants a higher interest rate than an equivalent customer outside of the Scheme. 

“Buyers on the scheme should be expecting a sharp rate from lenders, and certainly not one that reflects the low deposit they are putting in,” Mr Mickenbecker said. “The government is taking on 15% of the risk of the loan, so they should be treating scheme buyers as if they are coming to the bank with a 20% deposit.”

It’s important to note you will typically also have to cover some upfront costs associated with setting up a loan, in addition to the deposit you put down. It could be a good idea to ask your lender what fees you may have to pay and when you have to pay them.

What are the variable rates on offer under the First Home Loan Deposit Scheme? 

Canstar contacted approved lenders, asking them to supply the lowest variable loan rate they offered under the scheme.  The table below sets out the details provided by each lender (as of 30 January, 2020).

Most lenders are offering a variable rate of around 3% or lower.  The lowest rate for a 5% deposit (excluding introductory offers) is from G&C Mutual, at 2.79% (comparison rate 2.79%), followed by CUA (2.98%, comparison rate 3.03%) and The Mutual Bank (2.98%, comparison rate 3.40%). Also offering rates under 3% are Mortgageport (2.99%, comparison rate 3.05%) and People’s Choice Credit Union (2.99%, comparison rate 2.99%). 

How to use this table: 

This table lists the lowest variable rate loan from each scheme lender for a scheme participant with a 5% deposit (as supplied by the lenders but excluding loans with promotional rates). It could be used as a guide, along with other forms of research, to work out which lender a buyer might like to approach about a place on the scheme. On this table, it could also be a good idea to look at the “minimum loan amount” column to ensure that the loan fits with the location – and corresponding property price cap under the scheme – of the property you want to buy.  

Lowest Variable Rate Home Loans Confirmed by Lenders of the First Home Loan Deposit Scheme (FHLDS)
Lender Loan Lowest Variable P&I Rate Comparison Rate^ Min deposit Min loan amount
Australian Military Bank RateSaver Home Loan 3.31% 3.32% 5% $150,000
Auswide Bank Home Loan Plus – Freedom Package 2.99% 3.40% 5% $100,000
Bank Australia Basic Home Loan 3.10% 3.14% 5% None
Bank First First Rate Home Loan 3.19% 3.24% 5% $150,000
Bank of us FlexiDiscount First Home Loan Deposit Scheme Rate Special 3.03% 3.09% 5% $20,000
Bendigo Bank Bendigo Owner Occupied Basic Home Loan 3.24% 3.39% 5% None
Beyond Bank First Home Buyers Total Home Loan Package 3.49% 3.89% 5% $50,000
Commonwealth Bank* Extra P&I 95% 3.32% 3.33% 5% $10,000
Community First Credit Union Accelerator Home Loan Package 3.24% 4.14% 5% $250,000
CUA Achieve Variable 2.98% 3.03% 5% $500,000
Defence Bank Ultimate Home Loan Package 3.95% 4.32% 5% $250,000
Endeavour Mutual Bank First Home Buyer Basic Variable 3.22% 3.25% 5% $20,000
G&C Mutual Bank First Home Premium Package 2.79% 2.79% 5% None
Gateway Bank Low Rate Essentials 3.01% 3.04% 5% $500,000
Indigenous Business Australia* NHFIC Scheme-Backed Loan Commencing rate of 2.00% or 3.00% depending on gross income, increasing by 0.25% per year following the introductory period. Varies 5% Varies
Mortgageport First Home Loan Deposit Scheme Home Loan 2.99% 3.05% 5% $50,000
MyState Bank Basic Variable Home Loan 3.03% 3.06% 5% $100,000
National Australia Bank Base Variable Rate P&I Special Offer 3.09% 3.09% 5% $20,000
People’s Choice Credit Union Basic Variable New Business Owner Occupied P&I <80% 2.99% 2.99% 5% $150,000
Police Bank First Home Loan 3.18% 3.26% 5% $50,000
P&N Bank Simple Home Loan 3.17% 3.17% 5% $50,000
QBANK Classic First Home Buyer (FHLDS) 3.04% 3.07% 5% $150,000
Queensland Country Credit Union Ultimate Home Loan Package 3.39% 3.76% 5% $100,000
Regional Australia Bank First Home Loan Deposit Scheme Loan 3.06% 3.08% 5% $100,000
Sydney Mutual Bank First Home Buyers Basic Variable 3.22% 3.25% 5% $20,000
Teachers Mutual Bank (inc. Firefighters Mutual Bank, Health Professionals Bank and UniBank) My First Home Loan 4.41% 4.41% 5% $25,000
The Mutual Bank First Home Buyer Package Home Loan 2.98% 3.40% 5% $150,000
WAW Credit Union Back to Basics Low Variable 3.44% 3.49% 5% None specified
Source: Lowest variable rates for owner-occupier borrowers making principal and interest repayments. Rates provided by lenders on 30/01/2020, except those indicated by *, which were sourced from and verified with the lender. Rates shown do not include temporary introductory rates. This is not a complete list of products available under the Scheme, check with your lender. Table sorted alphabetically by lender. Additional eligibility requirements may apply to some of these products and rates – check with your lender to confirm whether you qualify. ^Comparison rates based on secured credit of $150,000 and a term of 25 years. The comparison rate applies only to the example or examples given. Different loan amounts and terms will result in different comparison rates. Read the Comparison Rate Warning

It’s worth keeping in mind that many of the lenders have multiple variable loans available under the scheme, as well as fixed-rate loans for varying periods of time.   For example, where lenders also supplied fixed rate loan details to Canstar, several of the fixed-term rates for those loans were cheaper than the variable rates the same lenders offered. (However, for some of those lenders, the comparison rates on those fixed-rate loans were higher than their lowest variable comparison rate. Comparison rates can be used as a guide to compare loans which have different rates, fees and duration, as they are an indication of the total cost of a loan.)  

There could be other benefits to consider than the interest rate of a home loan, such as incentive packages, loan special features such as offset or redraw accounts, customer service, banking apps or deals that individual banks might offer various borrowers in an effort to win their business. Fees and other charges associated with applying for, setting up and maintaining the loan should also be taken into consideration when choosing a lender, and you may want to consult the loan documentation or lender for a particular loan to confirm how much these could be. 

Some scheme lenders also have special conditions for certain types of buyers, such as discounts on fees or rates for defence service personnel, or cashback schemes for new customers.  

It could be a wise idea to seek professional financial advice. 

No deposit home loan
Source: (Shutterstock)

How does the First Home Loan Deposit Scheme work?

Lenders contacted by Canstar suggested applicants: 

  1. Visit a participating bank or their broker: Tell them you’d like to be considered for the scheme. (See the list of lenders approved for the Scheme here.)
  2. Request a place: Your chosen participating lender will assess if you are eligible for a spot in the scheme. You’ll be required to provide proof of your full name and date of birth, your Medicare number, your Notice of Assessment for your taxable income for the 2018-19 year, and other documents your lender may require for this assessment. If you are eligible, and there’s a spot available, the lender will reserve a place on the scheme for your loan. If there is no spot available, you can ask if they have a waiting list, or if you can reapply for the next round of the scheme. 
  3. Finalise your budget: After that, you have 10 days to obtain conditional approval for a loan (also known as pre-approval) from a lender. This will determine how much you can borrow and therefore how much you can spend on a home. You are allowed to swap scheme lenders at this stage, and keep your reserved place.
  4. Find a house: You then have 90 days to find, negotiate for and sign a contract on a property, ensuring the home is priced below the property price threshold for its location. Price caps vary according to state and region. It could be wise to stay in contact with your lender during this time and update them regularly.
  5. Buy the house: When you sign a contract to buy your chosen house, you then have up to 30 days to complete the settlement period. This is to allow time for the bank to finalise the loan, and for the usual legal processes that allow a house contract to settle.
  6. Move in: You must then be living in the house within six months of settlement.

It is important to note that to remain eligible for the scheme, buyers must meet all conditions of the scheme and of their chosen bank. If a buyer fails to qualify for their loan, for instance, or doesn’t settle in time during the purchasing process, their spot in the scheme would go back into the pool. The buyer would then have to reapply for a spot on the scheme, and would have to have discussions with their bank about potentially paying for LMI. This could impact whether or not the buyer could obtain a loan, and if the sale could proceed. 

Do prospective first home buyers need to have a house in mind before approaching a bank about the the First Home Loan Deposit Scheme?

Participating lender Gateway Bank’s head of product and pricing, Ryan Holman, told Canstar that “no one should be looking for a house anticipating a place in the scheme if they have not already had pre-approval” for a loan. 

“They should, however, make sure that the property they are looking at meets the scheme’s eligibility criteria.” 

Can a prospective first home buyer change lenders under the First Home Loan Deposit Scheme? 

Prospective first home buyers who have a reserved place on the scheme can change lenders if they wish to do so, so long as their new lender is one of the 27 lenders participating in the scheme. 

“If you have already been pre-approved, you can transfer your Scheme place to another lender,” Gateway’s head of product and pricing, Ryan Holman, told Canstar. 

“Just remember that the date that your reservation or pre-approval was set to end will continue to be the same; it won’t be reset.”

However, after you have been approved and the loan settles, it is not possible to refinance with another lender and keep the guarantee. The NHFIC states that: “The guarantee stays in place until the loan is refinanced, you sell your home, move out or until your loan principal balance reduces to below 80% of the value of your property at purchase.” 

However, it also states: “You may be able to move your guaranteed loan between participating lenders provided that in doing so there is no increase to the loan amount or the term of the loan and that it remains an eligible loan as defined in the Scheme rules.”

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