The best home loan deals are being offered by banking minnows, new analysis suggests

With interest rates rising again, new analysis reveals where you should be looking to secure the lowest home loan rate.

Little known banking minnows such as Reduce Home Loans, Homestar Finance and Unity Bank are offering borrowers the best home loan deals at a time when interest rates are on the rise.

Homeowners are being urged to shop around and look outside the Big 4 banks in order to save thousands of dollars in interest rate payments, with borrowers still able to secure a home loan rate below 2 per cent.

The Reserve Bank has hiked the cash rate by a hefty 0.5 percentage points.

That’s the biggest single hike in more than two decades and will add more than $106 to the monthly repayments of a $500,000 owner-occupier loan being paid off over 25 years.

Homeowners could save thousands of dollars in interest rate payments by looking outside the Big 4 banks.

RateCity research director Sally Tindall said rate hikes are unlikely to end on Tuesday and homeowners needed to stress test their long-term financial position and take action.

“Take time to work out what your repayments will look like by Christmas next year – if you don’t think you’ll be able to afford these higher repayments, take action now,” Ms Tindall said.

“The longer you wait to make changes, the bigger the bind you’ll find yourself in.”

The lowest home loan on offer is Reduce Home Loans’ variable rate of 1.94 per cent, according to RateCity analysis.

Fellow online non-bank lender Homestar Finance is charging 1.98 per cent for its variable home loan, while rival Pacific Mortgage Group is charging 1.99 per cent.

All of the above rates apply to owner occupiers paying principal and interest.

For borrowers looking to lock in payment certainty, Unity Bank is offering a 1-year fixed rate loan for 2.49 per cent.

The catch is that it is only being offered to first home buyers.

Homeowners are being urged to stress test their long-term financial position and take action.

The lowest 2-year fixed rate loan is being offered by Orange Credit Union which is charging 3.19 per cent, according to RateCity.

In contrast, the lowest 2-year fixed rate loan offered by a big four lender is Westpac’s product which charges 4.29 per cent.

Customer owed bank BankWAW has the lowest 3-year fixed rate loan at 3.55 per cent, while BCU is offering 4- and 5-year fixed rate loans charging 4.19 per cent and 4.39 per cent, respectively.

Ms Tindall said borrowers on the hunt for a bargain basement loans should not rule out smaller lenders who they have not heard of.

People could get a bargain by looking at smaller lenders.

“For many people, the idea of moving their home loan over to a lender called Nano or Athena might not sit well with them,” she said.

“However, you might be surprised when you look at who’s backing these little lenders and how long they’ve been around for.

“Lenders such as Tic Toc and 86 400 are backed by big established banks, while stalwarts such as Homestar Finance and Reduce Home Loans have been operating in the market for well over a decade. Athena and Nano are both relatively new, but they’ve been set up by former bank executives looking to shake up a market dominated for decades by the big four.

“In terms of risk, it’s worth remembering the lender is the one loaning you the money, not the other way around. If the lender went belly up, one of the more likely scenarios is that it would be bought out by a larger player and your mortgage would transfer across.

“If you don’t like the new environment, you can always move, particularly if you’re on a variable rate.”

For those determined to stay with the big four, ANZ’s variable home loan is charging 2.29 per cent.

For those looking for a fixed product, Commonwealth Bank, Westpac and National Australia Bank are offering 1-year fixed loans at 3.59 per cent, while ANZ is charging 3.79 per cent.

Westpac is offering the lowest rates in the 2-year to 5-year fixed rate space.

It is charging 4.29 per cent on its 2-year fixed home loan compared to the CBA’s 4.39 per cent and NAB and ANZ 4.59 per cent.

In the 3-year fixed home loan space Westpac is charging 4.69 per cent while CBA, NAB and ANZ are all charging 4.99 per cent.

In the 4-year segment Westpac is charging 4.79 per cent against ANZ’s 5.09 per cent, CBA’s 5.19 per cent and NAB’s 5.39 per cent.

Westpac is also the only major bank with a 5-year fixed home loan priced at below 5 per cent.

Its product charges 4.89 per cent while ANZ is charging 5.19 per cent, CBA 5.29 per cent and NAB 5.49 per cent.