Paul's Insights: Rate war benefits borrowers
The Reserve Bank may have kept the official cash rate on hold in May but behind the scenes, banks are taking the axe to home loan rates - and borrowers are the winners.
- {{x.value}}
{{ twilioFailed ? 'SMS Code Failed to Send…' : 'Enter your SMS code' }}
Please type the 5 digit verification code sent to {{user.DayPhone}}
We cannot send you a code via SMS to {{user.DayPhone}}
Verify your mobile number
{{ content.trialHeading.replace('{0}', user.FirstName) }}
Please enter your mobile number and press send to receive a text message with a verification code.
{{ content.upgradeHeading.replace('{0}', user.FirstName) }}
The email address you entered is registered with InvestSMART
Please login to continue
We have sent you an email with the details of your registration.
Already a member? Log in
Looks you are already a member. Please enter your password to proceed
{{ upgradeCTAText }}
Updating information
Please wait ...
Your membership to InvestSMART Group recently failed to renew.
Please make sure your payment details are up to date to continue your membership.
Having trouble renewing?
Please contact Member Services on support@investsmart.com.au or 1300 880 160
You've recently updated your payment details.
It may take a few minutes to update your subscription details, during this time you will not be able to view locked content.
If you are still having trouble viewing content after 10 minutes, try logging out of your account and logging back in.
Still having trouble viewing content?
Please contact Member Services on support@investsmart.com.au or 1300 880 160
Please click on the ACTIVATE button to activate your Eureka Report 15-day free trial
Please click on the ACTIVATE button to activate your Intelligent Investor 15-day free trial
Please click on the ACTIVATE button to finalise your membership
Unsuccessful registration
Registration for this event is available only to Eureka Report members. View our membership page for more information.
Registration for this event is available only to Intelligent Investor members. View our membership page for more information.
- You are already registered for this event.
- This event is already full.
- Please select a quantity for at least one ticket.
- {{ i }}
Forgotten password
Please enter your email address below to request a new password
- Indepth analysis of ASX listed shares
- BUY, Hold and Sell Recommendations
- Ideas Lab
- Special Reports
- Alan Kohler’s Weekend Briefing
- Interviews with CEO’s & top influencers
- Money Cafe and Talking Finance
- Super Advice and Q&A with Ask Alan
ANZ is the most recent of the big four banks to drop interest rates across several of its fixed rate home loans. Earlier this month, Australia’s fourth largest bank cut between 0.20% and 0.60% off owner occupier and investor fixed loans, bringing the bank into line with its other big four competitors.
In April, Australia’s fifth largest home loan lender, ING, dropped rates on several fixed home loans by up to 0.19%, to deliver a 3-year fixed rate of 3.64%. Macquarie Bank, Australia’s eighth largest home lender has slashed variable rates on a range of home loans by up to 0.51%. According to Mozo, Macquarie’s lowest ongoing variable rate, available to new owner occupiers, is now 3.69% – a drop of 0.12%.
In a super-competitive lending market it pays to think outside the square. Plenty of newcomers and smaller lenders are also offering red hot deals. Athena Home Loans for instance is offering rates as low as 3.59% to refinancers.
As a guide to how good these deals are, Reserve Bank figures show the average ‘basic’ variable rate is 4.68% for owner occupiers and 5.25% for investors. The average 3-year fixed rate is 3.99% for owner occupiers; 4.24% for investors.
To know how your loan stacks up for value, take a look at your latest loan statement to see the rate you’re paying. Research shows that two out of five borrowers don’t know their current home loan interest rate, but on a debt that probably tops a few hundred thousand dollars, there’s no room for complacency.
If you think your lender is holding something back, pick up the phone and demand a better deal. Or take a look at what else is available in the market. Loyalty doesn’t always pay – especially when it comes to financial products like home loans. When it’s possible to get a rate well below 4% if you’re a home owner, paying above the odds will only make your bank rich, while leaving you out of pocket.
To make an accurate comparison between loans, always look at the ‘comparison’ rate, which includes upfront and ongoing fees. Ask lenders for a home loan fact sheet too. This will show the comparison rate for the loan size you’re thinking of taking out.
Paul Clitheroe is Chairman of InvestSMART, Chairman of the Australian Government Financial Literacy Board and chief commentator for Money Magazine.
