When it comes to a home loan the interest rate that you pay makes a significant difference to the lifetime cost of that debt and with an official cash rate of just 1.50%, borrowers could be excused for laughing all the way to the bank. Even in a low rate environment though, there is still a very wide margin between the highest interest rate and lowest interest rate home loans available.
CANSTAR’s September 2016 Home Loan Star Ratings report has researched and rated 1,198 home loans across 98 lenders and Reduce Home Loans’ Rate Buster Home Loan 80%, with an advertised and comparison rate* of just 3.35%, has achieved a five star rating for Outstanding Value – and in doing so is the lowest-rate five star product on CANSTAR’s database.
CANSTAR caught up with Josh Beitz from Reduce Home Loans to find out how they can offer and sustain such a low rate.
Q: How is Reduce Home Loans able to offer a home loan rate this low? Why can’t everyone do it?
A: With the cash rate at 1.50% Reduce believes its rates should be the norm, not the exception. What’s not sustainable is the RBA cutting the cash rate to help stimulate the economy and the Majors not passing it on, at the same time as they announce record profits. All you have to do is look at the 18%+ gap between Credit Cards and the Cash Rate to realise something is wrong when Banks don’t have the likes of Reduce to compete with.
Q: Having such a very low rate and a well-featured product is indeed a five-star achievement. What research goes into your product development?
A: By working closely with Canstar we have been able to gather valuable information on what customers want with their home loan; we see no point in simply providing a basic product at a cheap rate. We want to give bells and whistles to our borrowers and these features mean that our clients have an all in one facility at the lowest rate we can make available.
Q: Are there any risks to borrowers in taking a home loan with a smaller institution rather than a big one?
A: People get hung up on big and small the fact is that we’re lending the money were not taking a deposit. Secondly there is more protection than most people are aware of in smaller lenders like Reduce because of the Trustee arrangement that upholds the integrity of the mortgage. Thirdly we get our money from the same sources that banks do, in the sense that our funding is securitised so it’s supported by large Super funds and cash management accounts and that loan pool is rated triple A credit rating, the strongest credit rating a loan pool can get.
CANSTAR congratulates Reduce Home Loans on its five star achievement. You can find out more about Reduce Home Loan’s CANSTAR ratings here and read CANSTAR’s Home Loans Star Ratings report here.
CANSTAR is an information provider and in giving you product information CANSTAR is not making any suggestion or recommendation about a particular credit product. If you decided to apply for a home loan, you will deal directly with a financial institution, and not with CANSTAR. Rates and product information should be confirmed with the relevant financial institution. For more information, read our detailed disclosure, important notes and additional information.