Rates at record lows but which home loans offer ‘outstanding value’?

With home loan interest rates at a record low and refinancing at a record high, what do lenders have to do to stand out in today’s highly-competitive market? Canstar reveals which products and providers emerged with 5-Star Ratings.

After two successive cash rate cuts earlier this year, home loan interest rates have plummeted. At the same time, many budget-conscious borrowers who are concerned about Australia’s recession, but are still in a financial position that allows them to be approved for a new home loan, have been shopping around in a bid to trim their repayments.

“Lenders are very hungry for new business,” Canstar Finance Expert Steve Mickenbecker said.

“In particular, they’re targeting refinancers who have a tried-and-true repayment record, meaning that if you’re in that kind of position, there’s never been a better time to look for a better deal”.

“There hasn’t been a cash rate cut since March, but we’re seeing continued reductions for new borrowers across the whole market, and interest rates have never been lower,” Mr Mickenbecker added.

This competitive environment may make it harder for consumers to tell providers apart when it comes to value, which is where our Home Loan Star Ratings could come in handy. Canstar Research assessed 3,063 home loans from 85 providers on our database to determine which products and providers offer outstanding value to consumers, based on both their price and features.

Response to cash rate cuts a deciding factor in this year’s Star Ratings

According to Canstar Research, this year’s results were largely driven by how quickly lenders responded to the rate cuts in March, and by how much they reduced their own rates. Lenders that passed on rate cuts of the full 50 basis points or more generally performed well, and those who passed on a smaller rate cut or didn’t reduce rates at all generally slipped in the rankings.

To illustrate the potential long-term benefit of taking out or switching to a 5-Star Rated home loan, the tables below display the average home loan interest rates from our database, the average interest rates of this year’s 5-Star Rated home loans, and the amount you could save in interest over 30 years by switching to a 5-Star Rated home loan.

Owner-occupier home loans on Canstar’s database

Loan Type

Average 5-Star rate Database average rate

Potential interest saving over 30 years

Variable 2.70% 3.51% $62,991
1-Year Fixed 2.22% 2.56% $25,258
2-Year Fixed 2.29% 2.52% $17,416
3-Year Fixed 2.31% 2.58% $19,919
5-Year Fixed 2.72% 3.01% $22,264
Based on rates available for a $400,000 loan amount at 80% loan-to-value ratio with principal and interest repayments. Rates current as of 31 August, 2020. Excludes loans with introductory periods and those exclusive to first home buyers. All applicable products assessed in Canstar’s September 2020 Home Loan Star Ratings have been considered. Interest savings based on the difference in total interest paid over 30 years at the respective average rates. Fees and revert rates not considered.

Investment home loans on Canstar’s database

Loan Type

Average 5-Star Rate Database average rate

Potential interest saving over 30 years

Variable 2.98% 3.88% $71,825
1-Year Fixed 2.51% 2.92% $31,323
2-Year Fixed 2.53% 2.86% $24,763
3-Year Fixed 2.53% 2.87% $26,112
5-Year Fixed 3.00% 3.30% $23,352
Based on rates available for a $400,000 loan amount at 80% loan-to-value ratio with principal and interest repayments. Rates current as of 31 August, 2020. Excludes loans with introductory periods and those exclusive to first home buyers. All applicable products assessed in Canstar’s September 2020 Home Loan Star Ratings have been considered. Interest Savings based on the difference in total interest paid over 30 years at the respective average rates. Fees and revert rates not considered.

“Borrowers owe it to themselves to compare their current rate against what else is on offer, because they may find some of the rates now available are significantly better,” Mr Mickenbecker said.

“This could make a significant difference to their monthly repayments and the total amount of interest they pay over the life of their home loan.”

This year’s overall 5-Star Rated home lenders

Based on the Home Loan Star Ratings results for individual products, below are the providers that have been recognised as providing outstanding value across the board within a certain category. The Fixed Home Lender, Home Lender and Variable Home Lender categories are for providers offering outstanding value to owner-occupier customers, and the Investment Fixed Home Lender, Investment Home Lender and Investment Variable Home Lender categories are for providers offering outstanding value to investment customers. The Line of Credit category relates to both owner-occupier and investment customers.

Fixed Home Lender

  • Adelaide Bank
  • AMO Group
  • ANZ
  • Aussie
  • Bank of Melbourne
  • BankSA
  • Firefighters Mutual Bank
  • Freedom Lend
  • Health Professionals Bank
  • HSBC
  • Pacific Mortgage Group
  • Reduce Home Loans
  • St. George Bank
  • Teachers Mutual Bank
  • TicToc Home Loans
  • UBank
  • UniBank

Home Lender

  • AMO Group
  • ANZ
  • Bank of Melbourne
  • BankSA
  • Freedom Lend
  • HSBC
  • Mortgage House
  • Pacific Mortgage Group
  • Reduce Home Loans
  • St. George Bank
  • TicToc Home Loans

Variable Home Lender

  • Freedom Lend
  • homeloans.com.au
  • Homestar Finance
  • HSBC
  • loans.com.au
  • Mortgage House
  • Pacific Mortgage Group
  • Reduce Home Loans
  • TicToc Home Loans

Investment Fixed Home Lender

  • Adelaide Bank
  • AMO Group
  • ANZ
  • Aussie
  • Firefighters Mutual Bank
  • Freedom Lend
  • Health Professionals Bank
  • Pacific Mortgage Group
  • RACQ Bank
  • Teachers Mutual Bank
  • TicToc Home Loans
  • UBank
  • UniBank
  • Westpac

Investment Home Lender

  • Adelaide Bank
  • AMO Group
  • ANZ
  • Aussie
  • Freedom Lend
  • Mortgage House
  • Pacific Mortgage Group
  • RACQ Bank
  • TicToc Home Loans

Investment Variable Home Lender

  • Freedom Lend
  • homeloans.com.au
  • Homestar Finance
  • Mortgage House
  • Pacific Mortgage Group
  • RACQ Bank
  • Reduce Home Loans
  • TicToc Home Loans

Line of Credit

  • Aussie
  • BankVic
  • Greater Bank
  • homeloans.com.au
  • Suncorp Bank

What does a 5-Star Rated home loan look like?

Canstar Research rated home loans using a methodology which considers both price and features, assessing all eligible products against at least one of 64 borrower profiles, based on loan purpose, type and size.

The methodology calculated a product’s price score by looking at:

  • Interest charges (based on the six-month historical average rate available for the product)
  • Upfront, ongoing and discharge fees (such as application fees and monthly account-keeping fees)
  • The revert rate (for fixed rate home loans which have rolled over to a variable rate, and for introductory periods on variable rate home loans)
  • In the case of fixed rate home loans, Canstar Research factored in at least one rollover (extension) of the fixed rate period, including any fees incurred.

To calculate a product’s feature score, the methodology considered the availability and quality of features from six categories, which were:

  • 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 its home loans or switching? 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?

A product’s Star Rating was based on its price score and feature score for each borrower profile. You can view the methodology for a full list of borrower profiles, and the weightings assigned to each one.

Read the methodology

How were overall 5-Star Ratings determined?

Overall 5-Star Ratings were given to the providers with the highest cumulative performance within a certain category. Providers were assessed based on their best-performing product’s scores in each of these categories.

For more information on how the winners of our Home Loan Star Ratings were calculated, you can read the methodology and view the full results.

This article was reviewed by our Sub Editor Tom Letts and Finance Editor Sean Callery before it was published, as part of our fact-checking process.

Follow Canstar on Facebook and Twitter for regular financial updates.


Thanks for visiting Canstar, Australia’s biggest financial comparison site*

→ Looking to find a better deal? Compare car insurancecar loanshealth insurancecredit cards, life insurance, as well as home loans, with Canstar.

Share this article