Outstanding Value home loan lenders revealed: Has your provider made the list?

With the official cash rate at an all-time low, a number of providers on our database have now reduced their home loan interest rates to under 3%. So, what could this mean for borrowers, and how can they make the most of this low-interest environment?

Since the Reserve Bank of Australia (RBA) first cut the cash rate in June and again in July this year, many lenders have slashed their interest rates on both variable and fixed rate home loans.

This year so far, there have been 564 variable interest rate cuts at an average of 0.48 percentage points, and 1,194 fixed rate cuts at an average of 0.61 percentage points, across home loans on Canstar’s database.

The database currently shows a total of 90 variable and fixed rate home loans for owner-occupiers with an interest rate of under 3%, at the time of writing.

Canstar’s Group Executive of Financial Services Steve Mickenbecker said we could expect to see more home loan rates fall below 3% if the Reserve Bank makes further cuts over the coming six months, with a cash rate of 0.5% “looking likely”.

When running the calculations for the latest Home Loan Star Ratings, Canstar Research found borrowers could potentially make significant savings over the life of their loan if they chose a suitable product with the lowest interest rate. For example, when comparing the interest charges on a $350,000 loan with an 80% loan-to-value ratio (LVR), we can see that the difference between the lowest variable rate and the highest variable rate on our database could equate to more than $220,000 in interest savings over the life of a 30-year loan.

Although home loan interest rates are considerably lower than the historical average, Mr Mickenbecker said it was important borrowers did not become complacent, as paying even 1% extra on your home loan could mean “gifting” the bank thousands more than you need to in interest each year.

“Borrowers should compare available rates with the rate they’re paying and if there are better deals out there, approach their lender for a cut or consider switching,” he said.

Mr Mickenbecker believes now was also a good time for borrowers to get ahead of their home loans.

“By keeping repayments where they have been rather than lowering them as their interest rate decreases, home owners can get debt-free faster, and that’s a liberating feeling,” he said.

Home Loan Star Ratings

Canstar’s Research team has crunched the numbers to determine which lenders offered Outstanding Value in terms of price and features to their customers.

They considered a total of 5,277 home loans in the latest Home Loans Star Ratings, analysing and rating 3,135 products that satisfied the eligibility criteria from 90 home loan providers.

Canstar awarded 18 home loan lenders with a 5-Star Rating, after finding that each of them offered Outstanding Value across one or more of the following borrower types:

  • Owner-occupier: An individual buying, refinancing or constructing a property to live in.
  • Investor: An individual buying an investment property or refinancing one they already own.
  • Line of credit: An individual who sets up a credit facility based on the equity they’ve built up in their property.

The lenders recognised as offering Outstanding Value to customers in the Home Loan Star Ratings are listed below.

Owner-Occupier Home Loan Star Ratings

Outstanding Value – Home Lender

Outstanding Value – Home Lender

An overall 5-Star Rating was given to lenders in this profile that provided outstanding value products to owner-occupiers across the variable and fixed-rate loan terms considered in these ratings. Home loans were assessed across four loan amounts ranging from $200,000 up to $750,000, for borrowers making principal and interest repayments. Here are the 5-Star recipients, listed in alphabetical order:

Canstar Research found owner-occupiers with a 5-Star Rated home loan tended to have access to lower interest rates compared to the market average, as displayed in the table below.

Owner-Occupier Home Loan Interest Rates
Loan Type Minimum Rate Maximum Rate Average 5-Star Rate Average Market Rate
Variable 2.99% 5.94% 3.23% 4.07%
1 Year Fixed 2.79% 5.26% 3.05% 3.71%
2 Year Fixed 2.89% 4.95% 3.17% 3.59%
3 Year Fixed 2.80% 5.05% 3.13% 3.62%
5 Year Fixed 2.99% 5.34% 3.27% 3.98%
Based on a loan of $350,000 at an 80% LVR with principal and interest repayments. All products assessed in Canstar’s September 2019 Home Loan Star Rating have been considered. Rates current as at 10/9/2019.

Outstanding Value – Variable Home Lender

5-Star Rated lenders in this category were those that consistently offered outstanding value to owner-occupiers across the variable rate home loans considered in these ratings. Home loans were assessed across four loan amounts, ranging from $200,000 up to $750,000, for borrowers making principal and interest repayments. Here are the 5-Star recipients, listed in alphabetical order:

  • AMO Group
  • Freedom Lend
  • Homestar Finance
  • HSBC
  • loans.com.au
  • Mortgage House
  • Pacific Mortgage Group
  • RACQ
  • State Custodians
  • TicToc Home Loans

The research showed owner-occupiers who chose a 5-Star Rated home loan had the potential to save themselves thousands of dollars over the life of the loan. For instance, the average variable interest rate for a 5-Star Rated owner-occupier loan valued at $350,000 with an 80% loan-to-value ratio (LVR) and principal and interest repayments was 3.23%. This compared favourably to the market average of 4.07% out of all products on Canstar’s database. Over a 30-year loan term, that difference could equate to more than $60,000 in savings on the total cost of the loan.

Outstanding Value – Fixed Home Lender

Lenders that received an overall 5-Star Rating in this profile were found to have consistently provided outstanding value products to owner-occupiers across the one, two, three and five-year fixed rate loan terms considered in these ratings. Home loans were again assessed across four loan amounts ranging from $200,000 up to $750,000 for borrowers making principal and interest repayments. Here are the 5-Star recipients, listed in alphabetical order:

  • AMO Group
  • BankVic
  • Freedom Lend
  • Greater Bank
  • HSBC
  • Newcastle Permanent
  • RACQ Bank
  • Suncorp Bank
  • TicToc Home Loans
  • Ubank

5-Star Rated home loans for a three-year fixed residential loan valued at $350,000 with an 80% LVR and principal and interest repayments offered an average interest rate of 3.13%, compared to the average from our database of 3.62%.

Compare Home Loans

Investment Home Loan Star Ratings

Outstanding Value – Investment Home Lender

Outstanding Value – Investment Home Lender

An overall 5-Star Rating was given to lenders in this profile that offered outstanding value products to investors across the variable and fixed-rate loan terms considered in these ratings. Home loans were assessed across four loan amounts ranging from $200,000 up to $750,000 for borrowers making principal and interest and interest-only repayments. Here are the 5-Star recipients, listed in alphabetical order:

  • AMO Group
  • CUA
  • Freedom Lend
  • Greater Bank
  • Newcastle Permanent
  • Nexus Mutual
  • RACQ Bank
  • Suncorp Bank
  • TicToc Home Loans

The research revealed 5-Star Rated home loans offered investors lower interest rates when compared to the market average from our database.

Investment Home Loan Interest Rates
Loan Type Minimum Rate Maximum Rate Average 5 Star Rate Average Market Rate
Variable I/O 3.49% 6.51% 3.71% 4.63%
Variable P&I 3.29% 6.34% 3.51% 4.37%
1 Year Fixed I/O 3.25% 5.37% 3.48% 4.11%
1 Year Fixed P&I 2.99% 5.26% 3.44% 3.91%
2 Year Fixed I/O 3.10% 5.37% 3.56% 3.99%
2 Year Fixed P&I 3.09% 5.25% 3.49% 3.79%
3 Year Fixed I/O 3.00% 5.37% 3.46% 4.00%
3 Year Fixed P&I 3.00% 5.35% 3.51% 3.81%
5 Year Fixed I/O 3.59% 5.81% 3.73% 4.35%
5 Year Fixed P&I 3.49% 5.61% 3.72% 4.15%
Based on loan of $350,000 at an 80% LVR with principal and interest and interest only repayments. All products assessed in Canstar’s September 2019 Home Loan Star Ratings have been considered. Rates current as at 10/9/2019.

Outstanding Value – Investment Variable Home Lender

5-Star Rated lenders in this profile were those that consistently offered outstanding value products to investors across the variable loans considered in these ratings. Home loans were assessed across four loan amounts ranging from $200,000 up to $750,000 for borrowers making principal and interest and interest-only repayments. Here are the 5-Star recipients, listed in alphabetical order:

  • AMO Group
  • Freedom Lend
  • Homestar Finance
  • Newcastle Permanent
  • Pacific Mortgage Group
  • RACQ Bank
  • SCU
  • State Custodians
  • TicToc Home Loans

Canstar Research revealed there were potential savings to be found for investors if they chose a 5-Star Rated home loan. For instance, the average interest rate on a 5-Star Rated variable investment loan of $350,000 with an 80% LVR and principal and interest repayments was 3.51%, and the 5-Star interest-only average was 3.71%. These average rates compared favourably to the market averages from our database of 4.37% and 4.63%, respectively. These differences can potentially add up to be quite significant over time – for example, over a 30-year loan term, investors making principal and interest repayments could potentially save more than $61,000 on the total cost of the loan.

Outstanding Value – Investment Fixed Home Lender

Lenders that received an overall 5-Star Rating in this profile were found to have consistently provided outstanding products to investors across the one, two, three and five-year fixed rate loan terms considered in these ratings. Home loans were assessed across four loan amounts ranging from $200,000 up to $750,000 for borrowers making principal and interest and interest-only repayments. Here are the 5-Star recipients, listed in alphabetical order:

  • Freedom Lend
  • Greater Bank
  • Newcastle Permanent
  • Nexus Mutual
  • RACQ Bank
  • Suncorp Bank
  • TicToc Home Loans

For borrowers looking to fix their investment home loan, the difference in interest rates between a 5-Star Rated loan and the market average can be significant. For instance, the average three-year fixed interest rate for a 5-Star Rated investment loan valued at $350,000 with an 80% LVR and principal and interest repayments was 3.51%, and the interest-only rate was 3.46%, compared to overall averages from our database of 3.81% and 4.00% respectively.

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Line of Credit Star Ratings

Outstanding Value – Line of Credit

Outstanding Value – Line of Credit

Canstar Research compared the price and features of 46 lending institutions that provided a line of credit secured by a property. Here are the 5-Star recipients, listed in alphabetical order:

  • BankVic
  • Nexus Mutual
  • State Custodians
  • Suncorp Bank

Compare Home Loans

Canstar’s Home Loan Star Ratings are conducted twice per year. For more information about the September 2019 Home Loan Star Ratings, including how they were calculated, please view the ratings methodology.

View Ratings Methodology

Cover image source: Monkey Business Images (Shutterstock)

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