Loan rate slashed to new low at UBank

UBank slashed its three-year fixed-loan rate for owner-occupiers paying principal and interest to 1.75 per cent.

UBank slashed its three-year fixed-loan rate for owner-occupiers paying principal and interest to 1.75 per cent.

The home loan market is being shaken up by digital bank UBank which on Friday slashed its three-year fixed-loan rate for owner-occupiers paying principal and interest to 1.75 per cent.

Lower rates are considered a key driver of the home market by major property companies, while many analysts believe that activity is mainly being driven by government stimulus packages.

The rate represents the bank’s lowest ever advertised interest rate and comes as economists prepare for an extended period of very low rates. This has prompted forecasts that asset prices will rise by as much as 30 per cent over coming years.

UBank chief executive Philippa Watson said the company was committed to providing sharp rates to its home loan customers.

Since late May, UBank has more than halved the fixed-interest rate on its three-year owner-occupier (principal and interest) loan, from 3.59 per cent to 1.75 per cent per annum.

The drop has the potential to save customers $465 a month in interest payments and $16,740 over the full three-year fixed term, on a $480,000 owner-occupier loan paying principal and interest.

UBank has also reduced all of its other fixed rates by between 0.15 and 0.35 per cent per annum, with major banks expected to respond as they are keen to grow market share.

The residential property market has emerged as one of the key drivers of economic recovery in the wake of the coronavirus pandemic as buyers flood into the market with access to government assistance packages.

This is expected to keep the sector busy in the first half of the year before a potential slowing in some activity because so many purchases have been brought forward.

Lenders are cutting rates as they are keen to capture market share while purchasing volumes remain strong.