Whether you’re a first home buyer or looking to refinance, fixing your home loan rate may be an appealing option if you’re craving financial certainty. It’s perhaps not surprising, then, that some lenders have reported a surge in customers locking in a fixed rate on some or all of their home loan during the coronavirus crisis. The record-low fixed interest rates currently on offer may also be a draw for borrowers looking to fix all or part of their loan, and trim costs in the process.
But the value on offer across this section of the market is not ‘fixed’ and some lenders stand out when it comes to the interest rates, fees and features they offer to customers.
This means that if you’re going to lock yourself in for a period of up to five years, it could pay to shop around. To help with that, Canstar has assessed the fixed home loans of 85 providers in our database to determine which ones offer Outstanding Value to consumers.
How were providers assessed?
Canstar’s Fixed Rate Home Loan Award uses a methodology that compares home loan providers based on the performance of their fixed rate products in our Home Loan Star Ratings.
Providers in each category are assessed across two consumer profiles (Owner-Occupier and Investor) and four fixed rate terms (one, two, three and five years). Canstar’s Fixed Rate Home Loan Award is given to the providers with the strongest combination of products across these variables.
This year Canstar has recognised Award-winning lenders in the following categories:
- Customer-owned institutions (mutual banks, credit unions and building societies)
- Non-banks (lenders which are not authorised deposit-taking institutions)
Each provider is given separate scores for its pricing and home loan features. The price score is determined by calculating the total cost of a $350,000 home loan with a loan-to-value ratio (LVR) of 80%, including:
- Interest charges (based on the six-month historical average rate available for the product)
- Upfront, ongoing and discharge fees (e.g. application fees, monthly account-keeping fees etc.)
- At least one rollover (extension) of the fixed rate period, including any fees incurred
- 60 days’ worth of interest costs after the product reverts to a standard variable rate
The feature score is determined by taking the following product aspects into account:
- Research – What information is available online from the provider regarding its home loans?
- Application – What application channels are available? Does the provider offer pre-approval? What types of security will the provider accept?
- Management – What repayment options are available? Does the provider offer an offset account or a redraw facility on its home loans? Does the provider offer online self service facilities?
- Variation – What options does the provider offer for splitting or switching its home loans? Does it let you keep the same home loan if you move house?
- Support – What customer support facilities does the provider offer?
- Discharge – How easy is it to close the home loan, or refinance to a different loan/provider?
For the Owner-Occupier consumer profile, only principal and interest home loans were considered, while both principal and interest and interest only home loans were considered for investors.
Bank of the Year – Fixed Rate Home Loan – UBank
UBank has won Canstar’s Bank of the Year – Fixed Rate Home Loan Award for a third year running. Canstar Research said UBank continued to stand out when it came to offering competitive fixed rates, leading the way for banks across three and five-year terms.
It was the market leader in its profile for three and five-year terms across both owner occupier and investment profiles, and was very strong across its one-year offerings.
Customer Owned Institution of the Year – Fixed Rate Home Loan – Teachers Mutual Bank (including Firefighters Mutual Bank, Health Professionals Bank and UniBank)
Teachers Mutual Bank (including its subsidiaries Firefighters Mutual Bank, Health Professionals Bank and UniBank) has won the Customer-Owned Institution of the Year – Fixed Rate Home Loan Award for the first time. Canstar Research said the group’s win was driven by aggressive interest rate reductions following March’s cash rate cuts.
Its residential home loans saw rate cuts of up to 79 basis points over the last six months, and its investment home loans saw cuts averaging 94 basis points at the time of writing (27/08/2020). Teachers Mutual Bank (including Firefighters Mutual Bank, Health Professionals Bank and UniBank) was the market leader in its profile for one and three-year fixed terms.
Non-Bank of the Year – Fixed Rate Home Loan – Freedom Lend
Freedom Lend has taken out the Non-Bank of the Year – Fixed Rate Home Loan Award for the fourth year in a row. Canstar Research said Freedom Lend’s five-year fixed home loans differentiated it in an extremely close market, in which it faced stiff competition to hold onto its Award.
Freedom Lend was the market leader in its profile for five-year terms, and was extremely competitive across one, two and three-year terms.