Home Loans

Competitive home loan rates for first home buyers, refinance or investment

Last updated on May 20th, 2022 at 04:23 pm by Cate Cook

Compare home loans with Savvy

If you’re looking to find the very best home loan you’ve come to the right place! It doesn’t matter whether you’re looking for your first home, refinancing or looking to invest – Savvy will find you a home loan with the most competitive interest rate which best suits your individual lifestyle needs.

We’ll make it as easy as possible for you to find your perfect home loan by comparing Australian banks and lenders and providing you with all the information you’ll need to make an informed choice. We do the legwork so you don’t have to!

We compare home loan options for you so you can be assured you’re seeing the most competitive interest rates available in Australia.

Figure out how much you want to borrow – choose the features you need – then apply for your loan secure in the knowledge that you’re getting the very best deal possible!

Home Loans

Home loan features and benefits

Lowest interest rates

By comparing home loans from multiple lenders, Savvy can help you get the most competitive interest rate available in a loan packed with many extra features you need.

Flexible loan terms

Whether you need a loan for 10 years or 30, compare with Savvy to find a lender who’s able to offer you the ideal term for your home loan, investment loan or refinance option.

Fixed, variable or combination ‘split’ loans

You have the freedom to choose whether your loan has a fixed interest rate, a variable rate or a combination of the two – it’s entirely your choice!

Flexible repayment options

Match your mortgage repayments to your regular pay cycle, either weekly, fortnightly or monthly, giving you the possibility of paying off your loan sooner. 

Offset accounts available

You can save thousands of dollars in interest payments over the life of your loan by having an offset account linked to your variable home loan account.

Redraw additional repayments

If you’ve made additional payments into your home loan, a redraw facility will enable you to access these funds if your family circumstances change or life throws a curveball your way.

Early repayment? No problem!

Many of our lenders are now offering lump sum repayment options, so if you suddenly receive a windfall like an inheritance, you could pay off your home loan sooner. 

Help if you’re struggling to save a deposit

If you’re struggling to save a 20% deposit, then lenders mortgage insurance may enable you to get a loan with only 5, 10 or 15% deposit.

How to apply for your home loan

More about home loans

Home loans latest update - May 2022

Australian Bureau of Statistics figures show new loan commitments fell 3.7% in February (in seasonally adjusted terms), which may indicate the shine has finally come off the housing bubble. With a falling rate of new loan commitments, competition between the lenders will heat up, which could result in a wave of cashback offers and honeymoon lending rates to attract new customers.

On 27th April 2022 economists were surprised when the latest Consumer Price Index statistics showed a rise in the March quarter inflation figure up to 5.1%. The Reserve Bank had predicted an interest rate rise would be necessary when inflation reached 3.5%, therefore it was almost inevitable that when the March quarter inflation figure came in at over 5%, an interest rate rise would swiftly follow. On Tuesday 3rd May the Reserve Bank announced an increase in the cash rate of 25 basis points, bringing it up to 0.35%.

So what does this first interest rate hike for nearly a decade mean to the average home-owning Aussie? To put it simply, home loans are about to get far more expensive, with the big banks such as Commonwealth Bank, ANZ, NAB and Westpac announcing their standard variable mortgage rates would increase by the full 25 basis points, which equates to a 0.25% p.a. increase in home loan interest rates.

For an average 25-year mortgage of $500,000, this interest rate rise will mean an increase in mortgage payments of around $65 a month. On the flip side of the coin, some of the banks such as NAB also announced a 0.25% increase in the interest they pay on savings.

With further interest rate rises likely in the coming months, now may be a good time to have a close look at your own mortgage, with a view to either locking in a low interest rate through a new fixed-term loan, or refinancing your loan to get a better deal.

Savvy can help you find the best home loan for your family’s needs by presenting free, accurate and timely loan comparison information across the whole range of Australian mortgages. With interest rates on the rise, now may be the perfect time to lock in a great low rate.

What is a home loan?

A home loan is a sum of money loaned to a borrower to enable them to buy a property. This could be for a first home, an upsize or downsize or an investment property. In March 2022, the value of new loans to buy existing owner-occupier houses in Australia was $16.58 billion, so home loans are big business.  Almost every Australian looking to buy a home these days will have to do so with the help of a home loan, thanks in large part to the significant growth in housing prices in Australia over the past few decades. 

What is the principal sum?

The money provided to you by your lender is known as the principal sum, which is paid back to the lender over an extended period (usually 25 to 30 years).  In return for the convenience of being able to borrow the required sum, the borrower will pay interest on the loan at either a fixed or variable rate of interest.  This interest is expressed as a percentage per annum (% p.a.), with interest on home loans calculated daily but usually paid either weekly, fortnightly or monthly.

What interest rate types should I compare before taking out a home loan?

Home loan interest is calculated daily and payable however frequently you make your repayments (either weekly, fortnightly or monthly). This is done based on your outstanding principal, meaning the interest you’ll pay will slightly decrease with every payment until you pay off your mortgage in full. You can choose between the following options when it comes to how you’ll be paying interest:

Variable rate home loans

Variable rate loans (which have an interest rate that fluctuates according to the Reserve Bank of Australia (RBA) cash rate) are still the most popular type of home loan in Australia, accounting for almost three-quarters of all home loans, according to the RBA.  However, their popularity decreased from 2015 onwards as interest rates plummeted, eventually reaching record lows in late 2021.  In mid-2022, interest rates were increased by the RBA for the first time in more than a decade, signalling a change in interest rate direction.

Variable rate loans give borrowers an increased level of flexibility when it comes to paying off their mortgage earlier than originally planned.  They also allow the early repayment of a loan for no added cost, making switching home loans cheap and easy.  The nature of variable loans means you’re able to capitalise on rate decreases by refinancing your loan often, but the downside is you’re also susceptible to any rate increases too.  This can be a disadvantage in a period of rising interest rates and can cost you a fair amount if you enter the housing market at the wrong time with a variable loan.

However, there are also other advantages of variable rate loans besides loan flexibility.  Having an offset account linked to your home loan can save you thousands in interest if you park all your spare cash there or use it to have your wages or salary paid into.  Since interest is calculated daily and an offset account reduces the interest you’ll be charged on a dollar-for-dollar basis, they can save you a great deal over the life of your loan. If you’re looking for a low interest rate, repayment flexibility and the ability to offset and switch home loans easily, a variable rate home loan may be the one for you.

Fixed rate home loans

Unlike variable rate loans, fixed rate mortgages lock in the interest rate on your loan for a set period, usually one to five years. The beauty of this is if you find a great interest rate, you may be able to approach your lender to lock it in for an extended period. This certainty surrounding your interest rates allows you to more accurately budget into the future, giving you a better idea of where your finances will be at the end of the fixed term. If your household budget is tight as is, you might prefer the stability fixed rates bring so you can divide your funds with confidence.

However, fixed rate home loans generally won’t afford you the same freedom as variable rate home loans.  You may not be able to make additional repayments or pay your loan off earlier.  If you want to refinance your home loan during your fixed term period, you’re likely to incur a substantial early exit fee for breaking the fixed loan agreement. Locking your interest rate in for an extended period can protect you from interest rate rises but it can also prevent you from accessing lower interest rates that may be offered.  For these reasons, it’s important to choose your home loan carefully, particularly in a period when home loan interest rates could be on the increase.

Split rate home loans

There’s an option which gives you the best of both worlds: split rate home loans allow you to fix a portion of your home loan whilst keeping the rest variable. What this does is divide your home loan into two portions, so you can apply two different sets of interest to the respective portions.

Splitting your loan will ensure you can maintain a level of certainty around the fixed portion (and potentially secure a great low interest rate), whilst also having the ability to make additional contributions to the loan whenever you wish.  You can choose the portion of your loan which is fixed and variable (such as 60/40 or 70/30) and tailor it to suit your preferences.

Splitting your home loan in two means you’re not only paying interest on both loans but potentially paying double fees too. Of course, it’s preferable to avoid having to pay extra fees wherever possible, but they may be tough to dodge with a split rate home loan.

There’s also the potential for you to get your split wrong.  For example, if the variable rate increases right after you’ve fixed only a small portion of your home loan, it could cause regret that you hadn’t fixed a larger portion of your loan at the lower interest rate.  You can use our split rate loan calculator to crunch your numbers to help you decide how much of your new loan you should split between fixed and variable rates.

What other types of home loan are available?

Self-employed home loans

If you’re a sole trader or self-employed, you may not meet your lender’s criteria when it comes to providing documentation about your income in the way a pay-as-you-go (PAYG) employee does. If you’re able to produce documents which prove your income (like your tax returns from the previous two financial years, and other business documents), you’ll likely be able to qualify for the same full documentation (full doc) home loan available to any other borrower. 

If you can’t produce the requested documents for whatever reason, though, you’ll probably need a low documentation (low doc) home loan. This type of home loan carries greater restrictions on maximum loan-to-value ratios (LVR) and will generally come with a higher interest rate.  For example, you may be limited to an LVR of 80%, meaning you’ll have to find a 20% deposit. However, once you’ve got your low doc loan and, in time, can produce the necessary documents, you may be able to refinance again to convert your home loan into a cheaper full doc loan.

Investment property loans

These are loans approved for people to buy an investment property.  They’re usually second mortgages, with the borrower still paying off their original home loan in addition to their investment property loan.

Investment property loans can either be variable or fixed rate loans.  You can either pay back the principal and interest on the loan (like on a conventional home loan) or you can opt for an interest-only (IO) loan.  These are loans in which the borrower only pays the interest on the loan, and does not make any attempt to reduce the principal sum they have borrowed.  This type of loan is particularly useful for those who plan to sell their property within the next few years.  IO loans are only approved for a set period, typically up to a maximum of around five years, before reverting to a standard principal and interest structure.

This way of arranging property finance may bring substantial tax advantages to those who wish to claim a tax deduction on the income tax they pay.  However, investment property loans don’t come cheap.  The interest charged on such loans is often between 1% p.a. and 3% p.a. higher than standard home loans and the requirements for a deposit may be more stringent than on a first home loan.

Construction home loans

This type of home loan is designed for those who are looking to build a new property or carry out significant renovations.  In contrast to more standard home loans, payments are provided in instalments, known as progress payments.  These are paid directly to the builder once pre-determined building milestones have been met.

You’ll usually only have to pay a fixed rate of interest on the amount you’ve withdrawn on your loan.  This means your repayments will gradually increase as your house becomes more complete.  Once the building is finished, the loan often reverts to a standard variable rate home loan or owner-builders refinance to a fixed rate loan.

Line of credit home loans

Alternatively, borrowers can draw from their home equity up to a pre-determined limit to access funds from a line of credit home loan. Home equity is calculated by the amount you owe on your home loan subtracted from the overall value of your property.

This form of finance is generally open to you if you’ve owned your house for some time and have built up sufficient equity to access.  Lines of credit can be useful if you’re looking to purchase investment property or renovate your current home, affording you the freedom to withdraw funds when you need them, but they can attract higher interest rates than other home loans.

Non-conforming home loans

While this type of loan can help self-employed workers, it isn’t limited to just them. As the name suggests, this type of home loan is designed to cater to those who don’t quite fit the usual lender requirements for a standard borrower.  This may be because they earn a low income or have enough in savings to qualify for a home loan.  They may have a low credit score or are recent migrants to Australia and can’t confirm their credit history.

These days, such issues don’t need to prevent such people from applying for a home loan, as there are now many specialist lenders who welcome applications from such ‘non-conforming’ borrowers.  However, interest rates, fees and the required minimum deposit are all generally higher for non-conforming home loans than for standard loans.  You can use Savvy’s borrowing power calculator to work out how much you may be able to borrow.

Bridging loans

If you haven’t been able to sell your property before purchasing your next home, you may need a bridging loan to help fill the gap. These are short-term loans to cover the gap between buying and selling and are often capped at six months (if you’re selling your existing property) or 12 months (if your house is being built).  Bear in mind you’ll have to pay your bridging loan repayments in addition to your existing home loan repayments if you’ve already bought a new property but are having trouble selling your existing home.

How much will I need for my home loan deposit?

The size of your deposit will depend on the type of home loan you choose but, as a general rule, lenders prefer home loans of 80% loan-to-value ratio (LVR).  This means you’ll have to pay a minimum of 20% of the price of your new property as a deposit.

LVR is calculated by subtracting the cost of your deposit from the price of the property and working this number out as a percentage of the original property value. Essentially, it’s the amount lenders are stumping up to help you buy your property.

Example:   

  • $70,000 deposit ÷ $350,000 property value = 0.2 (20% deposit)
  • Complete property value (100%) – deposit (20%) = 80% LVR

Despite 20% being the preferred deposit amount by many banks, there are lenders on the market willing to accept deposits of as little as 5% in the right circumstances (for instance, if the borrower has a strong financial or borrowing history).  These are known as 95% home loans.

Such a loan may be the best option for you if you don’t have sufficient funds for a larger deposit. However, increasing your upfront payment can help you avoid having to pay Lenders Mortgage Insurance (LMI). This insurance is designed to cover the lender if you become unable to repay your home loan.  It doesn’t come cheap and can set you back thousands of dollars. However, there are ways around paying LMI when putting forward a sub-20% deposit which are important to bear in mind if you find yourself in this position. These include:

  • Taking advantage of government programs as a first-time buyer – the First Home Loan Deposit Scheme (FHLDS) and the New Home Guarantee are both designed to guarantee up to 15% of your deposit, meaning you’ll only have to pay 5% and no LMI. You can also use First Home Owner Grant (FHOG) funds, which can vary from up to $10,000 to $20,000 depending on where you live, to make up part of your deposit.
  • Apply with a guarantor – if you have a parent or grandparent to act as guarantor for your home loan, they can put up some of their home equity and agree to take on the responsibility of repaying the loan should you become unable to. Under this arrangement, you can borrow up to 100% or more of your property’s value in some cases. If you own any other property, you can also use home equity in place of a cash deposit without a guarantor.
  • Work in a profession your lender considers safe – there are some situations where lenders will be willing to waive LMI for loans of up to 85% or 90% LVR off the back of your employment. For instance, law and medical professionals are often able to take advantage of this waiver and save thousands with a smaller deposit.

How do I compare home loans?

Here are some of the areas you should look at when comparing different lenders in the home loan market.  Savvy can take the legwork out of comparing loans by presenting you with easy-to-follow, accurate comparison data to help you make great comparison decisions.

The interest and comparison rates

Your interest rate will determine how much your monthly or fortnightly mortgage repayments are.  If the interest rate goes up on a variable rate loan, your repayments will also increase by the same amount.  You can use our loan comparison calculator to compare two home loans side-by-side. For example, on a $500,000 loan taken out over 25 years, a 0.25% increase in the interest rate (say, from 2% p.a. to 2.25% p.a.) will result in an additional mortgage payment of between $60 and $70 a month, which may add over $18,400 to your mortgage cost overall.

The interest rate offered should be your main priority in the mortgage comparison process, as even small differences in rates can lead to significant savings.  However, your loan’s comparison rate is a more accurate reflection of the true cost of the loan and is possibly the more important figure for you to compare between lenders.  You can use Savvy’s comparison rate calculator to work out your loan’s comparison rate if you’re aware of all the fees being charged.

A loan’s comparison rate is inclusive of both the interest and fees you’ll have to pay on your home loan, so it’s a more accurate representation of what’ll be added to your principal payments. It’s based on a $150,000 loan taken out over 25 years.  This is a standard measure across the whole home loan industry and enables consumers to compare ‘apples with apples’. For example, a home loan with a 2% interest rate but a 3.75% comparison rate will be far more expensive overall than one with a 3% interest rate and 3.25% comparison rate. Note that comparison rates don’t include additional fees which you may choose to pay, such as an early exit fee which could be charged if you break a fixed term loan contract.

Loan repayment frequency

Traditionally, home loans were repaid monthly.  However, these days, lenders typically also offer fortnightly and weekly instalment options. You can save money paying fortnightly because there are 26 fortnights in a year, rather than 12 months, so you’ll effectively be making an additional monthly loan payment per year, thus paying off your loan more quickly and saving yourself interest.  In addition, because interest is calculated daily, making payments more frequently reduces the interest you pay overall due to the more rapid decrease in outstanding principal.

These days, fortnightly payments are the most common, with some homeowners even choosing to pay off their mortgage weekly to save even more money.  When comparing loans, check that your lender offers you the option to choose your repayment frequency.  Savvy’s fortnightly and weekly repayment calculator will assist you in seeing how your loan frequency affects your mortgage repayments.

Home loan fees 

Whilst it’s inevitable that you’ll have to pay some fees on your home loan, there is the potential to reduce fee payments through careful comparisons.  Look for loans which have no account-keeping or monthly fees and compare application and establishment fees.  Standard home loan fees may include:

  • Loan application or establishment fee – expect to be charged between $150 to $700 by some lenders
  • Ongoing monthly account-keeping fees – between $5 and $15 a month
  • Annual package fees – charged by some lenders if you bundle several financial products together, sitting between $200 and $400
  • Property valuation fees – between $100 and $300
  • Mortgage discharge fee – if you’re refinancing, you may have to pay to discharge your original mortgage, so expect to pay around $350 to $500

It’s also important to be aware of early exit fees. These can be charged if you wish to break the terms of a fixed rate loan.  These fees can amount to thousands of dollars depending on the size of your loan, the term of your fixed period and how much of this fixed rate period is remaining when you want to end it.  You should always make sure the benefit of refinancing isn’t negated by any fees you incur as a result of doing so.

As an example, let’s say a borrower took out a $500,000 loan over 30 years and agreed to a fixed-rate period of three years with a 3% p.a. interest rate. Two years into this agreement, the borrower decides to refinance the loan to one which has a 2.25% p.a. interest rate.  Their lender calculates the early exit loss adjustment fee to be $3,072 and also charges an exit penalty fee of $500, so the borrower is charged $3,572 overall to exit his loan with one year remaining of his fixed rate period.

Other non-bank fees you may encounter when buying a new home include:

  • Pest and termite inspection fees – between $250 and $400
  • Conveyancing fees – your conveyancer will charge between $800 and $2,000 depending on the complexity of the settlement
  • Mortgage registration fees – to register your mortgage with your state’s Land Titles Office, costing up to $200

Deposit requirements 

Many lenders won’t go above 80% for their LVR (particularly the big banks) but other lenders can loan as much as 95% of your property’s value.  When comparing different lenders, it’s important to keep an eye on what their deposit requirements are to ensure you’re able to qualify for the loan you’re after.

Additional and bonus features 

Lenders will often advertise bonus features as a sweetener to attract new clients.  Some of these may include: 

  • A honeymoon interest rate: this is an introductory home loan interest rate designed to attract new client attention, but they usually only last from six months up to a year or two before reverting to a more standard interest rate. When comparing such loans, check if the introductory offer really does represent good value. Use Savvy’s introductory rate calculator to compare two such loans side-by-side.
  • Free additional or early repayments: some lenders can be strict when it comes to the additional repayments you can make on your home loan, particularly if you have a fixed rate loan. Look for a lender who won’t charge you to make extra contributions to your loan amount (or, if you have a fixed rate loan, look for a generous additional repayment allowance such as $20,000 p.a.).  You can use our extra repayments calculator to see how making extra repayments regularly on your home loan can help you pay it off far sooner and save you plenty in interest.
  • A mortgage offset account: this is a particularly useful tool when it comes to reducing the amount of interest you’ll pay on your loan, as every dollar you have in your offset account will reduce the interest you pay on the principal of your loan.
  • Portability: this feature allows you to keep your existing home loan but change the property which secures it, which is also known as ‘security substitution’. In effect, you take your home loan with you when you move house.
  • Redraw facilities: if you’ve been making extra repayments off your loan but suddenly need more funds, a redraw facility will allow you to withdraw your additional funds back out from your loan account and use them. Redrawing from your mortgage could be a far cheaper and more manageable option than using other, more expensive options to give you quick access to cash if an emergency should arise.

Frequently asked home loan questions

Can I be approved for a home loan if I have bad credit?

Yes – while it may be difficult, there are options open to customers with bad credit to be approved for their home loan.

If I’m receiving Centrelink payments, can I still qualify for a home loan?

Yes – provided that your Centrelink payments are supplementary to your main income and are purchasing with a partner who is earning enough to qualify you for your home loan.

What is stamp duty and how much will I have to pay?

Stamp duty is a state tax that is levied on the sale of property.  The rate of stamp duty that you’ll have to pay varies from state to state, so there’s no hard and fast answer about how much you’ll have to pay. Just as the stamp duty rate changes from state to state, so does the timeframe in which you need to pay it. You can use Savvy’s stamp duty calculator to work out how much it’ll cost you in your state.

What is a First Home Owner Grant (FHOG?)

The FHOG was introduced in Australia in 2000, and offers a one-off lump sum to first home buyers to help them buy their first home.  There are other schemes in addition to the FHOG which vary from state to state, but most of them have the following conditions:

  • You must be over 18 years to apply
  • You must be an Australian citizen or permanent resident
  • You must be buying the home to live in, and move in within 12 months of purchase
  • You must not have previously owned a home in Australia
  • You must live in your new home for at least 12 months