Lender launches new rock-bottom interest rate

A boutique lender has delivered borrowers in in New South Wales, the ACT and Queensland the lowest home loan rates in Australian history, offering a one year fixed rate of 1.69 per cent.

The record-low rate is being offered by Greater Bank and undercuts HomeStar Finance’s previous low of 1.79 per cent on a variable rate loan.

After the first year, however, borrowers will need to refinance a Greater Bank Loan or accept a variable rate of 3.66 per cent.

Ratecity.com.au research director Sally Tindall said 24 lenders had cut 317 home loan rates since January 1.

“Although the momentum has slowed, some low-cost lenders are still shaving their rates to attract new business in the door,” Ms Tindall said. 

“Other low-cost lenders could challenge this rate in the coming months as they battle it out for the coveted title of Australia’s lowest rate mortgage,” she said. 

“At 1.69 per cent this is the lowest home loan rate we’ve ever seen, but it’s important to remember that it only lasts for one year.  

“While the revert rate is more than double the fixed rate, borrowers could still potentially be better off if they keep on their toes and re-fix, refinance or renegotiate after the first year.                                                                                             

“If you do decide to take up a fixed rate, diarise the end date and make sure you canvas your options before it expires,” she said. 

Canstar editor-at-large Effie Zahos said the Greater Bank rate was a boost for the property market, and should be a catalyst for every homeowner to chase a lower interest rate. 

“Interest rates will remain at rock bottom for the next three years, though fixed rates are likely to rise before variable rates do as the longer term bond market starts to anticipate monetary tightening a few years ahead,” Ms Zahos said.

“(This week’s) move from Greater Bank proves competition is still rampant in the home lending space and it may make sense to lock in either some or all of your home loan if you want to take advantage of these rock bottom fixed rates before they swing the other way round. 

“If you’re going to lock in a competitive rate for one year then it’s important to understand the other rates on offer from that lender, as that’s what you will be facing at the end of the fixed term unless you are willing to move again.”

Ms Zahos said borrowers should consider splitting their home loans across several fixed terms, or even a variable rate if lenders continue to offer a suite of competitive interest rates. 

“This way after the one year fixed rate expires you’re not exposing the entire loan to whatever the market rates are at the time as you’ve locked in to various terms,” Ms Zahos said.

“With your loan split into multiple fixed rate terms, the added bonus is that if your lender allows extra repayments during the fixed terms you’re effectively doubling or tripling the amount of  additional repayments you can make. 

“Of course, be sure to weigh up any accounts fees first as this could offset the savings.”