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What are the lowest home loan rates?

When you're shopping for a mortgage, one of the most important factors to consider is the interest rate. After all, the lower the interest rate, the less money you'll spend on interest charges.

However, it's not quite as simple as searching for the loan with the lowest interest rate and calling it a day. The lowest home loan rates will differ between borrowers and loan types, so it ultimately depends on your personal circumstances.

For example, a first home buyer may not be eligible for the same interest rate as a refinancer, an owner occupier would likely be offered a different rate to someone buying an investment property, and the interest on a variable rate home loan will typically differ to a fixed rate home loan.

Additionally, different home loan lenders will have different rates, with smaller, online lenders often being able to offer lower interest rates than bigger lenders like the big four banks (Commonwealth Bank, NAB, Westpac and ANZ). The reason smaller lenders may have lower rates is because they tend to have reduced overheads and operating costs.

Once you're able to identify the type of buyer you are and the home loan features that are important to you, you can narrow down your search to find the lowest home loan rates that may be available to you.

Why should you look for the lowest home loan rates?

Lower home loan interest rates may save you money on interest charges, meaning you can typically expect cheaper home loan repayments. This could leave more room available in your household budget, and offer you extra flexibility to make progress towards your personal and financial goals. 

If you can comfortably afford the monthly repayments on a low rate home loan, you may be able to also make some extra repayments onto your mortgage. Making additional repayments could mean paying off your property faster and potentially paying less interest.

It's also important not to be complacent once you have a mortgage, as you could be eligible for a lower rate once you've built up equity in your property and reduced your loan to value ratio (LVR). Refinancing to another home loan product or lender offering more competitive rates could be simpler than you may think.

Do the lowest rates mean the cheapest home loans?

A home loan's interest rate is just one of the costs you may incur when taking out a mortgage, which means the product with the lowest advertised rate isn't guaranteed to be the cheapest deal for you. As well as comparing interest rates, it’s also important to consider the fees and other charges to work out the overall cost of the loan. 

A handy way to compare the total cost of different home loans is to look at the comparison rate, which combines the cost of interest plus standard fees and charges into a single percentage figure. Keep in mind that not every extra cost will be included in a loan’s comparison rate, so it’s still important to look carefully at your available options.

RateCity's Real Time Ratings™ system can also help you understand the total cost of a loan, as it rates each product's average monthly cost out of five stars. Real Time Ratings™ factors in a loan's advertised rate, revert rate (if applicable), upfront fees, ongoing fees and discharge fees when determining its cost rating. It also gives each loan product a flexibility rating, so you can get a more complete picture of the value it offers.

What will your repayments be with the lowest rate?

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What are some other important features of a loan?

While a loan's interest rate and comparison rate are key considerations, it's also important to compare the features that are on offer. While they tend to differ depending on your loan type, lender, and many other factors, here are some of the features that may be available to you:

Offset account

An offset account is a savings or transaction account that works just like a standard bank account, but is linked to your mortgage and gives you the opportunity to reduce your payable interest. 

Any money that you put in your offset account is included when your lender calculates the interest owing on your mortgage. For example, if you have a $350,000 principal loan amount, and $50,000 in your offset account, you would only be charged interest on $300,000 of your balance.

Extra repayments

Making extra repayments onto your mortgage could get you ahead of schedule and closer to paying off your home loan, reducing your total interest repayments.

Redraw facility

A redraw facility enables you to redraw any additional home loan repayments you’ve made, subject to the lending criteria. It allows you to work towards paying down your loan faster and reducing your interest charges, with peace of mind that you can access those extra funds if you need to.

Do fixed or variable home loans have the lowest rates?

When you're shopping for a home loan, one of the things you'll need to decide is whether you want a fixed or variable rate home loan.

Many mortgages have variable interest rates, which the bank or lender may increase or decrease over time depending on a range of economic factors, such as the national cash rate set by the Reserve Bank of Australia (RBA). This means the cost of your mortgage repayments may increase or decrease as your variable rate rises or falls. 

Some lenders offer fixed rate home loans, where the interest you’ll pay is locked for a predetermined length of time (often between one and five years). This keeps your mortgage repayments consistent during this fixed rate period, for simpler budgeting.

You may find low rate options available for both fixed and variable home loans. Keep in mind that choosing a low interest rate today may not mean that you’ll keep enjoying the lowest rate for the full length of our loan term. Variable rates may increase or decrease over time, and even if you choose a low fixed rate home loan, your mortgage will eventually revert to a variable rate, which may be higher.

What happens to my home loan when interest rates rise?

Variable interest rates will, by definition, fluctuate throughout the life of your loan, meaning your repayment amounts will too. So, it's important to have enough breathing room in your budget to allow for rate rises.

If you have a fixed rate home loan, your interest rate won't change during the fixed rate term. But, you'll need to be prepared for change at the end of this period when your interest rate reverts to the standard variable rate.

What are home loan introductory offers?

Some lenders may offer introductory variable home loan rates, or honeymoon rates, as special offers to incentivise new customers. They may also come with added bonuses such as cashback offers. After a set period of time, the introductory rates will then revert to a generally higher standard variable rate. 

If you choose a home loan offering a low introductory rate, ensure you know not only the exact period of time of this honeymoon period, but also what the lender's standard variable rate is. That way you can consider refinancing to a new, low rate loan that may better suit your needs.

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How do you find the lowest mortgage rates?

Finding the most suitable home loan options with the lowest interest rates might seem overwhelming when there are so many factors to consider. So, you might like to consider using some of RateCity's home loan comparison tools, including the following:

Comparison tables

Using a comparison table can help you narrow down your search so you're left with only the products that suit your specific needs. Simply use the filters to search by interest rate type, borrow amount, lender type, features, repayment options and more.

Consider starting with the “more filters” section on the rate table above and organising the list by “comparison rate”. This provides a starting point for the lowest home loan rates in Australia, before being filtered by other options, such as bank and lender, features, and more. 

Real Time Ratings™

RateCity's Real Time Ratings™ can be a helpful tool when comparing how much value a home loan product might offer you. The rating system gives each home loan a score out of five stars, based on loan costs and flexibility. It also factors in your loan size, deposit amount and borrowing type.

Home loan calculators

A home loan repayment calculator can provide you with an estimate of how much your repayments might cost based on:

  • How much you’d like to borrow
  • The interest rate you’d like to pay
  • Your preferred repayment type e.g. principal & interest or interest only
  • Your borrower type e.g. owner occupied or investment home loan
  • Your preferred loan term

By inputting this information, you can find out your estimated repayments on a weekly, fortnightly, or monthly basis, total interest payable, total amount payable, and your repayment schedule.

RateCity also has a number of other calculators that may come in handy at different stages of your home buying process.

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How do you negotiate a better home loan rate?

One thing to keep in mind when comparing interest rates is that while banks and mortgage lenders advertise home loans with particular interest rates, these may not be the rates that are offered to you. You may be able to negotiate with your lender to get a lower interest rate, or more favourable features and benefits when you apply for a home loan. 

Generally, if you can demonstrate to a mortgage lender that you can comfortably afford your repayments, and that there’s a low risk of you defaulting on your mortgage, the more likely that the lender may be willing to negotiate.

Similarly, if you are a mortgage holder and are shopping around for a better deal, you could attempt to negotiate with your current lender, or alternatively refinance to a lender with a more competitive offer.

Can a mortgage broker get you a lower home loan rate?

If you’re not confident about negotiating with a lender, or if you’d prefer to have an expert manage your home loan application, you may benefit from the help of a mortgage broker. These home loan experts can help you manage every aspect of the application process, from finding a low interest rate to organising your paperwork.

Mortgage brokers generally receive commissions from lenders so they typically don't charge you directly for their services. Plus, they can help you identify suitable home loan choices and negotiate with lenders - potentially securing a more competitive rate for your mortgage.

One thing to keep in mind, however, is that your mortgage broker may work with a limited number of lenders that they have a commercial arrangement with, meaning you could miss out on options that might be well suited to you.

Where can you find a mortgage broker?

It’s important to compare mortgage brokers in your local area, so you can be confident that your chosen broker has the experience and local knowledge required to help you choose the right lender and the best home loan for your personal goals and financial situation.

RateCity has compiled the details of mortgage brokers located throughout Australia. You can compare mortgage brokers located near you, and read reviews and star ratings from their other customers. Once you’ve found a broker that’s right for you, we can help put them in touch with you to discuss what you want from your home loan.

Find a broker to help you nab the lowest mortgage rates

What is a mortgage rate?

The interest rate on a home loan is sometimes called the mortgage rate. This percentage indicates how much interest the lender will charge you with each home loan repayment. Your interest rate is effectively the “cost” of “buying” the money you’re using to buy a property – the higher your mortgage rate, the more your home loan repayments may cost.

Using a home loan calculator, you can estimate how much your home loan repayments may cost, based on your mortgage rate, loan term, and loan amount. This may also be affected by whether you’re making principal and interest repayments or interest-only repayments, if you have a fixed rate or variable rate mortgage, and any fees and other charges that may apply.

Is the lowest home loan rate always the cheapest?

The home loan with the lowest interest rate may not always be the cheapest mortgage option for you. Sometimes a home loan with a low interest rate may charge high fees, which may cost more in total than a mortgage with a higher interest rate and no fees.

Consider checking the comparison rate, which combines interest and standard fees, to get a better idea of the overall cost of different home loan options.

Do you compare mortgages using the comparison or advertised rate?

A lot of Australians compare home loans using the advertised interest rate, which indicates how much interest you’ll be charged on your mortgage repayments. The lower your rate, the cheaper your home loan should be.

However, interest charges aren’t the only cost associated with home loans. Most mortgage lenders also charge fees on their home loans. A mortgage with a low interest rate and high fees can sometimes cost more than a mortgage with a high interest rate and low fees.

A home loan’s comparison rate combines the cost of interest with the cost of standard fees and charges into a single percentage rate. Mortgage lenders are required to display a comparison rate alongside their advertised rate to better indicate the home loan’s overall cost.

Keep in mind that to ensure consistency, all comparison rates are calculated assuming a $150,000 principal and interest mortgage with a 25 year term. As your home loan may be different, the comparison rate may not accurately reflect exactly how much your home loan may cost. Also, the comparison rate doesn’t include every home loan fee and charge, so it’s still important to compare home loans and read the fine print before you apply.

If a mortgage rate changes, will it affect your repayments?

If you have a variable rate home loan, changes to your mortgage rate may affect the cost of your repayments. Rising interest rate could cost you more in interest charges, while interest rate cuts could see you paying less interest on your home loan.

If you have a fixed rate home loan, your interest charges will stay the same during the fixed interest period, regardless of whether the lender’s variable rates rise or fall. Once the fixed rate term expires, your loan will revert to a variable rate, so be prepared in case of bill shock.

What are the different types of home loan interest rates?

A home loan interest rate is used to calculate how much you’ll pay the lender, usually annually, above the amount you borrow. It’s what the lenders charge you for them lending you money and will impact the total amount you’ll pay over the life of your home loan. 

Having understood what are home loan rates in general, here are the two types you usually have with a home loan:

Fixed rates

These interest rates remain constant for a specific period and are a good option if you’re a first-time buyer or if you’re looking for a fixed monthly repayment. One possible downside of a fixed rate is that it may be higher than a variable rate. Also, you don’t benefit from any lowering of interest rates in the market. On the flip side, if rates go up, your rate won’t change, possibly saving you money.

Variable rates

With variable interest rates, the lender can change them at any time. This change can be based on economic conditions or other reasons. Changes in interest rates could be beneficial if your monthly repayment decreases but can be a problem if it increases. Variable interest rates offer several other benefits often not available with fixed rate home loans like redraw and offset facilities and free extra repayments. 

Fact Check Verification

The information on this page was fact checked by Mahesh Perera, a broker in Queensland specialising in home loans, car financing, personal loans, debt consolidation, and asset financing. For more information on how brokers like this can assist you, look for a broker near you