Australian home loan rates fall to record low 1.69%

Chasing a low interest rate should be on the radar for homeowners and buyers as rates drop even lower to rock bottom figures.

The property market just got another boost with the lowest home loan rate in the market dropping to 1.69 per cent.

Lender Greater Bank announced the new market-leading rate of 1.69 per cent on Tuesday following a cut of 0.2 per cent to its one-year fixed rate for owner occupiers paying principal and interest.

With fixed rates continuing to lead the market with low rates, now could be an opportunity for mortgage holders to fix all or at least part of their loan.

Canstar’s editor-at-large and money expert Effie Zahos says chasing a low rate should be on every homeowners’ radar.

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Interests are at an lowest which is bringing more homebuyers to the market. Picture: iStock

“Interest rates will remain at rock bottom for the next three years, though fixed rates are likely to rise before variable rates do as the longer term bond market starts to anticipate monetary tightening a few years ahead,” Ms Zahos said.

“Today’s move from Greater Bank proves competition is still rampant in the home lending space and it may make sense to lock in either some or all of your home loan if you want to take advantage of these rock bottom fixed rates before they swing the other way round.”

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Ms Zahos said it’s important to understand the other rates on offer from the lender offering the competitive fixed rate. “That’s what you will be facing at the end of the fixed term unless you are willing to move again,” she said.

New research shows 91 per cent of lenders on Canstar.com.au allow borrowers to split their loan. The analysis reveals that some lenders allow borrowers to split their loan up to 10 times. The cost of setting up a split loan is about $213 on average.

“If the lender offers a suite of competitive fixed rates then you could consider splitting your loan across several fixed terms and even a variable rate,” Ms Zahos said.

“This way after the one-year fixed rate expires you’re not exposing the entire loan to whatever the market rates are at the time as you’ve locked in to various terms.”

Interest rates are as low as 1.69%. Picture: iStock

The benefit of splitting the loan is that you may be able to add extra repayments while still getting a low rate.

“With your loan split into multiple fixed rate terms, the added bonus is that if your lender allows extra repayments during the fixed terms you’re effectively doubling or tripling the amount of additional repayments you can make,” she said.

“Of course be sure to weigh up any accounts fees first as this could offset the savings,” she added.

More Aussies are obrriwing as home loan rates hit record lows. Picture: iStock

THE BEST RATES

Canstar data reveals there are 138 home loan rates below 2 per cent.

The lowest home loan rates on the market owner occupiers include Greater Bank, UBank, Homestar Finance, HSBC and Pacific Mortgage Group.

The lowest home loan rates on the market include Greater Bank, UBank, Homestar Finance, HSBC and Pacific Mortgage Group. Picture: Canstar

Canstar’s group executive of financial services Steve Mickenbecker previously told news.com.au that homebuyers should be paying around the 2-per-cent mark for a home loan and definitely not in the 3-per-cent range.

He explained that home loan rates are down to an ultimate low we haven’t seen before and buyers shouldn’t be paying any higher.

“In 2015, the average interest rate was around 5 per cent and in 2020 the national average was 3.32 per cent. That’s a huge difference in your buying power,” he had said.

MORE AUSSIES ARE BORROWING

Recent Australian Bureau of Statistics data showed that new home loan commitments have reached record highs as the low interest rate environment and government incentives spur on a flurry of buying activity.

The ABS data showed new housing loans for December soared 8.6 per cent on the previous month, with $26 billion added to the nation’s lending book.

Owner-occupier loan commitments, which rose 8.7 per cent in December, are at the highest level since June 2009, with Victoria having the largest jump.

ABS head of finance and wealth Amanda Seneviratne said loans for newly constructed properties had more than doubled since June 2020, in part to the implementation of building grants like HomeBuilder.

“Federal and state government measures, such as HomeBuilder and historically low interest rates are supporting ongoing growth in housing loan commitments,” she said.