Home loan rates plunge to record low in win for consumers
Lenders are gearing up for a mortgage rate war after the emergence of the nation’s cheapest-ever deal at less than two per cent. Here’s where you can get it.
Money
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Mortgage loan interest rates have plunged below the two per cent mark for the first time ever in Australia.
Experts believe a mortgage war is brewing after smaller lender Bank of Us dropped 1, 2 and 3 year fixed loans to 1.99 per cent – the lowest rates ever recorded.
Bank of Us is a Tasmanian-based lender and the deals on offer is only for Tasmanian residents.
The Reserve Bank of Australia has cut the cash rate twice in 2020 bringing it down to a record low of just 0.25 per cent and in turn banks continue to slash deals.
Many lenders are already offering both fixed and variable rate deals in the low two per cent range but these could fall further in the coming months.
The Mortgage and Finance Association of Australia’s chief executive officer Mike Felton said it was a “tremendous” time for borrowers to snap up rock-bottom deals.
“It could result in more lenders following suit,” he said.
“It’s great for competition and borrowers have never had a better opportunity to refinance.”
On a $300,000 30-year mortgage a borrower with a three-year fixed rate paying 1.99 per cent would have monthly repayments of just $1107.
This compares to a variable rate of three per cent where the monthly repayments would be $1265.
Financial comparison website RateCity’s spokeswoman Sally Tindall said it was fantastic to see borrowers could now get a mortgage rate with a “1” in front.
“This is game on for homeowners looking to fix,” she said.
“We expect more low lenders to follow suit with fixed rates under 2 per cent.”
RateCity’s database showed the cheapest variable rates offered by the big four are the Commonwealth Bank at 2.79 per cent, Westpac and National Australia Bank at 2.69 per cent and ANZ at 2.72 per cent.
Finsure managing director John Kolenda, who manages companies including 1300HomeLoan, said this could be the beginning of a mortgage rate war in Australia.
“It’s great for competition and this could be the sign of some intense competition that could follow and seeing other lenders do the same thing,” he said.
“It’s great for borrowers, it means they can save a considerable amount off their mortgage by switching from current home loans that are uncompetitive.”
Mr Kolenda said many borrowers were still paying interest rates in the high “3” per cent range.
HOW TO GET A BETTER DEAL
• Check the interest rate you are paying.
• All owner occupiers should be paying a rate with a “2” in front.
• If you are paying too much ring your bank.
• Speak to the mortgage retention team and ask for a better deal.
• If they don’t budge threaten to leave.
• Engage a mortgage broker if you need help.
Originally published as Home loan rates plunge to record low in win for consumers