Finding the best home loan

Published on August 22, 2016 3:02 pm, by

Disappointed that your bank didn’t pass on the full Reserve Bank cut in official interest rates?  It might be frustrating, but our research shows that people are missing out on much more than 0.25% by staying with expensive mortgages.

Having the best interest rate possible can save you thousands of dollars over the life of your loan.

It doesn’t sound like much but 0.5% really can make a big difference

The average new mortgage in Australia is $444,000 (Australian Financial Group: 2014).

A mortgage of $444,000 with an interest rate of 4.0% rather than 4.5% you will save $2,220 per year in interest and a whopping $46,785 over the life of a 30 year mortgage.

Just think what you could spend that $46,785 on. It could pay for a decent holiday every year or 2 or even fund private school education for one of your children.

Where do I find the lowest rates?

In the table below we have listed the home loans with the lowest interest rates we could find – for both variable rate and fixed rate loans.

The lowest variable rates we could find come from Reduce Home Loans and U-Bank.  Reduce Home loans won the 2015 and 2016 Canstar awards for outstanding value in variable rate home loans. Like other small lenders they are primarily online which lowers their costs and results in a lower interest rate for you. U-Bank is a subsidiary of NAB and is also an online player.

The lowest fixed rates we could find come from ING, U-Bank and Adelaide Bank.

All rates quoted in the tables are for owner occupied residential home loans.

Variable rate home loans (accurate at 22 August 2016)


Fixed Rate Home Loans – based on 3 year fixed rates (accurate at 22 August 2016)


*Waived in some circumstances
** We’ve included this product as it’s the lowest fixed rate that we could find with a 100% offset facility attached. Our view is, that given the rate is 0.45% higher than the previous product, unless you are planning on holding a high offset balance, you can find a lower fixed rate, and have a portion of your mortgage on variable with an offset account attached to that.

Standard offerings from the 4 major banks

With just over 70% of home loan lending in Australia provided by the 4 major banks it stands to reason that most borrowers will have a home loan from one of them.  While all of them will negotiate special package prices their standard interest rates give a good indication of the opportunity to shop around to get a better deal. Generally their standard rates are significantly higher than the lowest rates we could find.

Variable rates (accurate at 22 August 2016)


 3 year fixed rates (accurate at 22 August 2016)


Getting the refinancing ball rolling – 

Before refinancing it may be worth your while to make one last call to your bank and see if they will match the rate you have your eye on. If they don’t, it’s time to take action.

While you’re on the phone to them, ask for a payout figure and check the fees are low to exit your loan. Often variable rates will have a discharge fee and little else, where fixed rate home loans have additional interest penalties payable to exit.

To apply for a mortgage your options are to speak with a broker, approach the finance provider directly or where possible complete an application online.

Brokers are great, and they will help you navigate the market to find the best product to suit your circumstances. Be aware that the range of products they offer will tend to come from those they are approved to sell. The commission rates for products may differ as well which could influence what they recommend.

These are the things you need to have at the ready to apply –

  • Confirmation of your income, including income that is not wages or salary
  • Repayment history of your current home loan that you are refinancing
  • Confirmation of your debts and liabilities including repayment history (now might be a great time to consolidate higher interest debts in to your home loan)
  • An idea of the value of your property (a valuation will be done as part of the approval process)

Once you get in touch with the finance provider they will let you know exactly what they need to approve your finance.

The timing of the initial steps can be dependent on your ability to get the information that the finance provider is seeking and being available for things like property valuations. Once the mortgage is unconditionally approved and you have signed and returned your loan contracts, often the mortgage can be finalised within the following fortnight.

You may wish to engage a solicitor to review your contract and witness the signing of your mortgage documents however this is not compulsory. Once the finance provider receives the documents from you and checks they are all in order they will arrange a time to meet with your current mortgage holder and they will exchange a cheque for the deeds to your property.

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Jen is an experienced banking professional who loves wine, coffee, finding a bargain and of course her three beautiful children. Since Jen's first budget led her to buy a home at 20, Jen has passionately helped others to make better decisions with their money.

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