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Cheapest Home Loan Interest Rates Australia

Looking to save on your home loan? Compare some of the cheapest home loan interest rates in Australia with Savvy.

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, updated on August 7th, 2023       

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A large part of finding the cheapest variable home loan is all about comparing interest rates.  Fortunately, you can do just that right here with Savvy.  Aussies have been turning to us to help them find their ideal loans for over a decade, so you can do just that and compare the cheapest home loan interest rates in Australia all in one place.

Contact us today for a quote on BMW finance. Our quotes are free of charge, no obligation, tailored to your circumstances, and can provide you with great loan options from a wide range of lenders.

How can I access the cheapest home loan interest rates in Australia?

The cheapest home loans in Australia are currently with online lenders and the interest rates start with a 1 or a 2 (in January 2022), but how can you access these super-cheap loans?  Here are some of the ways you can maximise your chances of getting the cheapest variable home loan rates available in Australia:

  • Increase your deposit – the higher your deposit, the more chance you have of being accepted for a cheap home loan. You’ll get a good rate if you’re able to offer a 20% deposit, but if you increase that to a 40% deposit, you’ll be considered a prime customer and get the cheapest home loan rates available in Australia
  • Decrease your existing debt – you will present a lower risk to your lender if you have very little other debt, so try to get rid of any credit cards you don’t use, close any store credit you may have and shut down any other personal lines of credit through schemes such as ‘rent-to-buy’ or ‘buy now, pay later’. All these credit arrangements reduce your chances of getting the lowest interest rate available. 
  • Reduce your loan term – a longer loan term may increase your borrowing power, as the repayments will be less, but a shorter loan term means you pay less in interest overall over the life of the loan. Therefore, if you can make larger repayments by reducing your loan term (say from 30 years to 25 years), you’ll ultimately receive a cheaper loan.  Although getting a shorter loan won’t reduce your interest rate, it’ll save you thousands by reducing the interest you pay over the life of your loan.
  • Present with a very good credit score – preferably with a credit score over 750. The higher your credit score, the more chance you have of being accepted for the cheapest variable home loan rates in Australia.  To increase your credit score, pay off any other debts, continue to pay all your bills on time and maintain stable employment prior to your loan application.  However, your credit score isn’t the be-all and end-all here, as the nature of property as loan security means many Australians can access low rates.
  • Apply with a guarantor – if you apply for your home loan with a guarantor who also has a high credit rating and plenty of home loan equity, you'll maximise your chances of being accepted for a super-cheap home loan and stand a great chance of getting the cheapest home loan mortgage rate in Australia

Should I choose a fixed, variable or split rate home loan?

Fixed interest rate

A fixed rate loan has a fixed interest rate for a set period, such as 2.5% p.a. interest fixed for three years.  Typically, loans can be fixed for between one and five years, although you can refix your interest rate as many times as you wish throughout your home loan once you reach the end of each period.  The benefit of a fixed rate loan is that you have certainty about your loan interest rate and repayments, which makes household budgeting easier.  The disadvantage is that fixed loans can be more expensive to refinance and tend to offer fewer interest-saving features than variable loans.

Variable interest rate

A variable interest rate changes over time and is based on the Reserve Bank of Australia’s cash rate (which is the rate used by banks to lend money to each other) and your lender’s own decisions on whether to pass on rate cuts and rises.  Variable interest rate loans offer some of the cheapest home loans in Australia and are the most popular type of loan.  They can offer a range of interest-saving features such as offset accounts, flexible repayments, redraw facilities and the ability to pay the loan off sooner without incurring penalties.

Split home loans

A split home loan is one where a portion of the loan is on a fixed interest rate for a fixed term and another remains on a variable rate.  For this reason, they can offer the best of both types of loan, with borrowers able to choose what proportion of their loan is fixed and variable, such as 60/40 or 70/30.  In this way, borrowers can take advantage of interest-saving features such as offset accounts and flexible repayments, whilst at the same time having some certainty over the interest rate they’ll be paying for a portion of their loan, which offers some protection if mortgage rates are rising. Use Savvy’s split home loan calculator to see how much you can save by splitting your loan.

What is the difference between base interest and comparison rates?

Lenders advertise two interest rates for their products: a base interest rate and a comparison rate.  The base or initial interest rate is the actual interest rate charged on the principal sum you borrow.  The comparison rate is a standardised rate which all lenders have to display by law.

All loan comparison rates are based on a $150,000 loan taken over 25 years, which must include all the fees and charges which are payable for that loan.  These may include application fees, establishment fees, account keeping fees, administration fees and annual package fees.  These fees are added to the base interest rate, and converted to a percentage, to produce the comparison rate.

Therefore, the comparison rate of a loan offers a more accurate picture of the true cost of the loan once charges have been taken into consideration. 

However, note the comparison rate does not account for fees that may be encountered in situations where you have a choice of action.  For example, a comparison rate won’t consider fixed loan break fees – also known as early exit fees – which may be charged if you decide to refinance to another loan and break a fixed term loan.

Are the cheapest rate home loans necessarily the best?

Not necessarily – the best home loan for you will be one that gives you the cheapest home loan interest rate available in Australia, along with the flexibility and features you need to reduce your loan costs (if you’re able) plus the lowest fees. 

The cheapest home loan in Australia – often called ‘no-frills’ loans – may not give you additional features you need, such as a redraw facility, offset account or the ability to make unlimited additional repayments.  Using these features wisely may actually save you more money than if you just opt for the cheapest home loan interest rate which doesn’t offer additional cost-saving features. 

In addition to interest-saving loan features, it’s also important to consider a loan’s fees, as these can mount up over time.  Use Savvy’s home loan comparison calculator to find out how upfront and ongoing fees can make a difference to the overall cost of your home loan.

Savvy can help you compare home loans so you arrive at a solution that combines the cheapest home loan interest rate in Australia, with loan features you can use to save you money.  Savvy has been helping Australians find their ideal loan for over a decade, so you can rest assured we’ll be able to give you a high-quality comparison.

Top tips for reducing the interest you’ll pay on your home loan

Make frequent additional repayments

Paying more off your home loan can shave years off the length of your home loan, and so save you thousands in interest payments.  Even a small amount, such as $30 to $50 paid off your mortgage regularly, will make a big difference. Don’t rely on memory to make additional extra repayments towards your home loan.  Set up an automated payment to transfer money from your everyday account into your home loan the day after your wage is usually paid.

Compare loans with Savvy

Comparing different loan features side-by-side is the most effective way of ensuring you get the cheapest home loan interest rate in Australia.  Trust Savvy to take the hard work out of loan comparison and use our home loan comparison calculator to see exactly which loan is the cheapest when all charges have been considered.

Negotiate with your lender

If you discover that you’re paying a higher interest rate than is generally available, don’t feel shy about negotiating with your lender.  It’s OK to contact your lender and ask whether they can offer you a cheaper home loan interest rate.  As a valued customer, your lender will want to do everything possible to keep you as a client and may be willing to offer you an incentive to ensure you remain with them.  Check back with Savvy regularly to make sure you’re getting the cheapest home loan rate in Australia.

Use an offset account

Use an offset account to park your wages and any savings you may have.  Any money you have in your offset account will reduce the interest you pay on your principal, as your wages and savings will offset your loan principal dollar for dollar.  By paying your wages into your offset account, you can make your salary work harder for you by reducing the interest you pay on your loan.

More frequently asked questions about the cheapest home loan rates in Australia

How do I get to see my credit report?

There are several reputable credit report providers in Australia, including Equifax, Illion and Experian.  Everyone is entitled to receive one free credit report a year, so get online to check out your credit report today.

Are interest rates for property investment loans usually higher?

Yes, the interest rates lenders offer for property investment loans are usually higher than for standard home loans, because investment loans are considered to carry a higher level of risk than owner-occupied home loans.  Whenever the risk is increased, interest rates will be higher also.

Are interest rates for property investment loans usually higher?

Yes, the interest rates lenders offer for property investment loans are usually higher than for standard home loans, because investment loans are considered to carry a higher level of risk than owner-occupied home loans.  Whenever the risk is increased, interest rates will be higher also.

Why do online lenders offer cheaper interest rates than the big banks?

The cheapest interest rates available in Australia are offered by online lenders because they have fewer overheads and less infrastructure to support than traditional high street banks with multiple branches.  In addition, online lenders generally don’t have millions of shareholders demanding a profit each year, so they can offer cheaper financial products.

Is it better to have a cheap interest rate or more loan features?

That will depend on how you manage your finances and what your overall financial situation is.  If you’re able to make additional repayments above the minimum required, the addition of an offset account may be valuable to you.  However, if you’re struggling to make your minimum loan repayments, the lowest possible ‘no frills’ loan may be of more benefit to you at this stage in your life.

Can a mortgage broker help me get a cheaper interest rate?

Mortgage brokers can assist you in narrowing down your loan search options and can help you compare lenders.  The cheapest home loans are found by comparing a wide variety of lenders and loans to find a loan that offers you the cheapest interest rate with the loan features that you will use. Savvy can take the hard work out of loan comparison by presenting you with loan information to help you make the best choice.

Can I access the cheapest home loan rates if I’m self-employed?

Yes – the cheapest home loans in Australia are available to all types of workers, whether you’re employed full-time, part-time, casually or self-employed.  Savvy can help you find lenders who specialise in catering to the financial needs of self-employed people (who now make up around 18% of the Australian workforce).

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