Most lenders are raising home loan rates, why is this one cutting them?

Posted: 10 May 2021 10:34 am

As fixed rates rise, Athena is dropping its variable mortgage rates.

Online lender Athena today lowered its variable home loan rates. This cut brings its lowest rate down from 2.19% to 1.99%. These lower rates apply to new borrowers and Athena's existing customers.

While this 1.99% rate is only available to borrowers with 40% deposits (a product better suited to refinancers than new buyers), Athena has also cut its Liberate home loan offer, available with a 20% deposit, from 2.29% to 2.19%.

Athena's cuts come at a time when many lenders have slowly begun lifting rates, at least on their fixed rate products. Multiple lenders, including some of the Big Four banks, moved their fixed rates up by around 10-20 basis points last month.

A lower rate is always good news for borrowers. If you had a $450,000 loan over 30 years with a 2.29%, Athena's rate cut would save you $276 a year.

  • Monthly repayments at 2.29% = $1,729
  • Monthly repayments at 2.19% = $1,706

The savings are even bigger for borrowers on Athena's lowest rate. Using the same loan details as above:

  • Monthly repayments at 2.19% = $1,706
  • Monthly repayments at 1.99% = $1,661

This rate cut would save you $45 a month or $540 a year.

Athena's decision is interesting given the current rate environment. Home loan interest rates have never been lower in Australia. This is because the Reserve Bank has kept the official cash rate very low, driving down lenders' own borrowing costs for their variable loans (lenders don't always have cash to hand to fund your loan and need to borrow it themselves).

But lenders have been setting fixed rate loans even lower. This is a good way to entice customers and lock them in for a few years with a competitive rate. These rates have slowly started creeping up, but still represent some of the cheapest offers on the market.

Athena Home Loans only offers variable rate loans. Variable rates, as the name suggests, can change at any time. What makes Athena's rate cut more noticeable is that it applies to its existing customers too.

Not every lender does this. You might have a variable rate home loan and be shocked to find that your rate is still the same as it was when the loan started. Meanwhile your lender is advertising the exact home loan as yours but with a lower rate for new borrowers.

Athena promises to never do this. Its "automatic rate match" means that all borrowers get the same rate for the same product.

Of course, if you're after the absolute lowest home loan rate on the market, a competitive fixed rate could still work out cheaper. But variable rate loans tend to be more flexible, easier to exit from. And, as we see with Athena, a variable rate can sometimes fall even lower.

Looking to switch to a better deal? Check out our refinancing guide or compare a wide range of home loan rates.

Find the right home loan now

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