
≥ 20% Deposit
2.60 | % p.a. |
2.96 | % p.a. |
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📈 Interest rates are rising after the RBA raised the official cash rate. But you can still find a cheaper home loan with a low rate that suits your borrowing needs.
We've put together a set of low rate home loans for you to compare in the table below, including fixed and variable rates for home buyers and investors.
2.60 | % p.a. |
2.96 | % p.a. |
We update our data regularly, but information can change between updates. Confirm details with the provider you're interested in before making a decision.
The number one factor in determining a cheaper home loan is the interest rate. The lower the interest rate, the cheaper your monthly home loan repayments will be.
Let's compare three otherwise identical home loans with slightly different interest rates. This shows you just how much the interest rate can impact how much you pay for your home loan:
Interest rate | 2.50% | 3.00% | 3.50% |
---|---|---|---|
Loan amount | $600,000 | $600,000 | $600,000 |
Loan term | 30 years | 30 years | 30 years |
Monthly repayment | $2,370 | $2,529 | $2,694 |
Monthly saving | $324 | $165 | $0 |
Annual saving | $3,888 | $1,980 | $0 |
Obviously, the cheaper the home loan rate, the more you save – no surprises there. However, what you might find surprising is just how much you can save.
In our example, with a cheaper home loan interest rate that's 1% lower, you could save $3,888 over 12 months. This is money coming out of your pocket, which you could spend on other things – whether it's school fees and clothes for your kids, gadgets and devices or even holidays and shopping.
To find a cheaper home loan, you need to compare what's on offer from different lenders, making sure you're comparing apples with apples (for example, 2-year fixed-rate loans with other 2-year fixed-rate loans). If you're paying a higher interest rate for your mortgage and you haven't shopped around for a better deal, you're choosing to give your bank more money than you need to. Compare loans in the table above to see if you can get a better deal!
The interest rates in the table above are all very competitive products from lenders with whom Finder has a commercial partnership. But at Finder, we monitor the home loan market and have a database of interest rates from almost every lender in Australia.
Every month we analyse the rates in our database to create a definitive list of the market's cheapest loans.
We also track the market's lowest rates each month, giving borrowers a clear snapshot of what counts as a low rate.
You only need to look at the graph above to see how fast interest rates have risen this year.
The RBA lifted the cash rate in May and then again in June, this time by a whopping 50 percentage points. This means a variable interest rate loan that was 2.00% in April would now be 2.75%. That's a jump that would add $150 a month to the average borrower's repayments.
It's important to note that home loan rates are still really low. But they're rising very fast. And given how big Australian home loans have become, this could really hurt borrowers.
Updated on 08 June 2022 by Finder's home loans editor Richard Whitten.
The cheapest loan for you depends on your personal circumstances, so to find the cheapest loan for you, you need to be clear on your goals.
For instance, let's say you want to improve your overall financial position and you'd like an extra $40,000, so you can consolidate personal debts and credit cards. These are debts on which you're paying interest rates of 10-20%, so refinancing to a cheaper mortgage rate could save you a lot of money.
In the long run, you still save money by consolidating your credit cards and personal debts into your loan, even though you have not gone for the cheapest interest rate.
To find the cheapest loan for you, consider how much you need to borrow; your timeline; any debts you wish to consolidate; and your goals (for example, do you want to pay off personal debts, repay your home loan as quickly as possible, or reduce your monthly payments?).
With the 3.50% rate in our example above, you end up paying $969,936 in total over the life of the loan. This amount includes the loan principal (the money you borrow) and the interest charged by the bank or lender. We calculated this by using our loan repayment calculator; to see how much you could save over different loan scenarios, plug some different rates in and try it out for yourself.
With the cheapest rate of 2.50%, you end up paying a total of $853,461.
The difference is a massive $116,475, a staggering amount of extra money your lender gets for no good reason!
Keep in mind that the cheapest home loans in terms of interest rates may not have features such as offset accounts that could ultimately save you money, or they can lack flexibility on transactions that you may need to make post settlement, and/or they could charge you ongoing fees.
Here's where it gets really interesting. You could save even more money and own your home sooner if you make extra repayments every month.
Taking our scenario above, let's assume that you took out a loan at 3.50%. After 12 months, you shop around for a cheaper home loan deal, and you find a new loan with an interest rate of 2.50%. However – and this part is crucial – you continue to make repayments as if the interest rate was 3.50%.
This means you are making an extra repayment of $324 per month. However, for you, there's no change to your budget or lifestyle because you were already paying this amount each month anyway. Your new loan value is $590,000 (because you paid down $10,000 of the principal in the first year of repaying the mortgage) and when you refinance, you take out a new 30-year loan term.
According to our extra loan repayment calculator, by doing this from the very first day that you take out your new 30-year home loan, you would save a further $46,156 in interest and you would pay off your home loan 5 years sooner.
In other words, you'll stop making mortgage repayments at the end of year 25 instead of year 30. You get to be mortgage-free, five years sooner. Making extra repayments is how you can take a cheap home loan and make it work for you even more powerfully, so you become an outright homeowner sooner rather than later.
Australians are more loyal than we should be to banks and lenders – and loyalty may be your biggest mistake if you want a cheaper mortgage.
Look at the loans on offer from lenders big and small, and be aware that every bank and lender has its own credit policy, which can impact the way they assess your application. For example, some lenders have a bigger appetite for investment loans than others. Some have policies that are favourable for first home buyers. Others might offer lower rates if you have a bigger deposit, and some are prepared to offer a lower rate even if your deposit is smaller.
This is why it's so important to shop around when looking for a home loan. Keep in mind that every lender in Australia is regulated by ASIC and APRA and they are subject to the National Credit Code.
Here are some different types of lenders you can look at:
While everyone is interested in getting a cheap home loan rate, there are a number of other factors to consider too, including user-friendly apps and online banking portals, strong customer service, branch locations and the availability and selection of other financial products, like savings and transaction accounts. When shopping for a loan, the cheapest rate is one consideration – but it shouldn't be the only one.
It's important to understand all of the fees and charges before you commit to anything. Some lenders may charge you the following:
An analysis of fee costs in Finder's mortgage database shows the average cost of upfront home loan fees is $686.
Some loans also charge ongoing fees monthly or annually, and those can really add up: a fee of $10 per month may not seem like a lot, but it's $120 per year. Multiply that over 30 years, and that's $3,600 of your hard-earned money, which is better off in your pocket than in the bank's.
To avoid getting stung by fees, make sure you compare all of the costs involved in the loan, not just the interest rate.
For instance, you might choose a loan with a package fee of $395, but where monthly $15 account keeping fees are waived. If the loan's package features (such as offset or redraw) are useful and save you money, and the interest rate is low, this could still save you a lot of money.
Let's say you're currently paying a $15 per month account-keeping fee, so you're already spending $180 per year. This annual package fee is $395, which adds $215 per year to your costs. But will the interest savings more than make up for the extra cost? Are there other benefits that make this annual package fee worthwhile, such as fee-free credit cards or insurance discounts? You have to be aware of the true cost of the fees and work it out for yourself.
A home loan's comparison rate takes the cost of loan fees into account. It does this by using a hypothetical home loan and combining the fee cost with the interest rate. Importantly, the comparison rate generally takes into account a loan value of $150,000, and your actual home loan value may be much higher. Your actual home loan will have a different comparison rate.
For this reason, the comparison rate can be helpful, but you're better off looking at the actual fees of a loan and working out what they'll cost you.
Another way to make your home loan cheaper is to save a larger deposit and therefore borrow less money. Of course, this is much easier said than done and isn't always possible. If you're able to scrape together more funds at the beginning of your home loan, it can work out cheaper for you in several ways:
If you can't save 20% but your parents own a home and are willing to help you, they could guarantee your deposit and help you avoid paying LMI.
Your choice of repayment type may also directly affect your home loan costs. Here are your two options:
So, which is cheaper? It depends on what your priorities are. Over the life of a home loan if you only make principal and interest repayments, you are likely to pay less in interest.
However, during the interest only period, your repayments will definitely be lower. For some borrowers, the cheapest home loan is the one that saves you money right now, not the one that saves you money overall.
If you've lost your job or are struggling to make repayments, then temporarily switching to interest only could help you manage in the short term. Having an interest only loan on an investment property may also make financial sense as it allows you to maximise your tax deductions.
As with interest-only repayments, your home loan length can make your loan cheaper in the short term and more expensive in the long term (or vice versa).
A 25-year loan term will see you pay less interest than a 30-year loan term. That makes the home loan cheaper overall, but your monthly repayments will be higher.
It's all about striking a balance between affordable monthly repayments and overall interest.
Let's break down three examples. These loans are all for the same amount borrowed, but the loan term changes:
Loan term | 30 years | 25 years | 20 years |
---|---|---|---|
Interest rate | 3.00% | 3.00% | 3.00% |
Loan amount | $600,000 | $600,000 | $600,000 |
Monthly repayment | $2,529 | $2,845 | $3,327 |
Total cost* | $910,664 | $853,580 | $798,620 |
*Total cost here refers to the amount of interest you pay over the life of the loan, plus the principal.
The 30-year loan's monthly repayments are $316 cheaper than for the 25-year loan, but over the life of the loan, you'll end up paying $57,084 more in interest.
The 30-year loan's monthly repayments are $798 cheaper than for the 20-year loan, but if you pay that loan off in 20 years, you save $112,044 in interest.
Some of the market's cheapest home loans come in the form of special discount rate offers. These loans offer a cheap rate to entice you in but revert to a higher rate after a year or two.
Let's be clear, there's nothing bad about these deals. A low rate is a low rate. You just need to pay attention to the interest rate once the discount period ends and refinance to a better loan if your new rate jumps up. But every borrower needs to watch their rate, as lenders do move rates up and down (or keep you on your current rate while offering cheaper home loans to new customers!).
Also look at discharge or exit fees. You don't want to get hit with a big fee when trying to exit the loan later (although a small fee isn't so bad if the rate is very competitive).
Most of the time, variable rate loans are the best examples of cheap home loans. These products typically come with the market's lowest rates. They're also more flexible and it's easier to refinance.
But variable rates can change at any time, while fixed rates offer you certainty for a specified period of time. Most of the time, fixed rates are slightly higher than similar variable products. But at the moment, they're almost the same, and many of the cheapest home loans on Finder are now fixed rate loans.
But this could change in the future. You can read more about the difference between fixed and variable rates in our guide.
Some lenders offer special loans tailored to first home buyers that are worth checking out. You use our comprehensive guide to learn more about getting a loan as a first home buyer.
And don't forget about first home buyers' grants offered by many state and territory governments.
Mortgage brokers compare loans for you and are experts at helping borrowers find appropriate products. If you're confused or need help, a broker can be very useful.
But you should also know that many of the market's lowest rates (including many listed on this page) are offered by small lenders that don't appear in a mortgage broker's panel. If the lender isn't in the broker's panel, they cannot help you.
But brokers are helpful for other reasons, and if you have more concerns than just finding the absolute lowest rate, then speaking to a mortgage broker is a good idea. Just do your own research as well.
Saving up for your home loan deposit is a serious challenge for everyone. However, there are ways to trim your expenses, build your deposit and find home loans that don't need large deposits. To master the art of saving for a home loan deposit, you should look at our in-depth, six-part guide to home loan deposits.
You should always be comfortable with the lender you're planning on going with. If you're not aware of a lender, try calling it to find out about the company and its service level before lodging an application. Speak to previous customers or read customer reviews online.
Keep in mind that little-known lenders might be funded by a larger bank, as is the case with NAB-backed UBank or Firstmac-backed loans.com.au.
A finance and property journalist for more than 15 years, Sarah leads a team of passionate, experienced writers and editors as the Head of Editorial at Finder. She was previously managing editor of Your Investment Property magazine, Australian Broker magazine, and home loan comparison site, Your Mortgage. She's written for The Sydney Morning Herald, Canstar, Bupa and Tourism Australia, and has ghostwritten or edited over 25 books. Sarah also has a Bachelor of Arts in Communication from Griffith University. She is a regular media commentator and is passionate about showing Australians how to make their money work harder.
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Sign up for our FREE 8-week course to get on the property ladder.
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how can I get lown
Hi Hugo,
You can apply for one of the loans on this page by clicking the green button that says ‘Go to site’. Once you arrive at the lender’s site, you should have all the information you need to apply.
Cheers,
Sarah
I have a house that is located in Perth WA and the mortgage is fixed for 2 more years. I would like to change to a lender that is offering less than 3% as the fixed rate of 4.5% can you advise me the safest way to go? mortgage is approximately $160,000 on a 3 year old new home 4 x 2
Hi Rix,
Thanks for getting in touch!
You may refer to our complete guide to refinancing your home loan to know how to get started. You can also refer to our list of refinancing home loans to compare your options. Our table should allow you to compare the features and benefits of each loan provider such as max loan rate, interest and etc. This way it will be easier for you to see which provider fits you best. Banks like HUME, Virgin, and Ubank offer interest rates of less than 3%. If you need further help, a quick guide on how to compare home loans is also stated on the page.
A mortgage broker is the best person to reach out to see your options for refinancing. They can give you a multitude of options according to your situation. In the meantime, to give you an idea of how your monthly repayments will go, you may use our home loan calculator.
As a friendly reminder, carefully review the eligibility criteria of the loan before applying to increase your chances of approval. Read up on the terms and conditions and product disclosure statement and contact the bank should you need any clarifications about the policy.
Hope this helps and feel free to reach out to us again for further assistance.
Best,
Nikki
I have been looking into refinancing my property, but as it’s an acreage (60 ha), no lenders seem to be interested in me.
Hi Ian,
Thank you for getting in touch with Finder.
There are lenders from our rural or hobby farm home loans guide. You can compare your options using our comparison table. When you are ready, press the ‘Go to site’ button to apply. You can also seek professional help from a mortgage broker since you’re having a hard time finding the right bank/lender.
Before applying, please ensure that you meet all the eligibility criteria and read through the details of the needed requirements as well as the relevant Product Disclosure Statements/Terms and Conditions when comparing your options before making a decision on whether it is right for you. You can also contact the provider if you have specific questions.
I hope this helps.
Thank you and have a wonderful day!
Cheers,
Jeni
I have just paid off my house worth approx $800-850k. I am looking at ways besides dying to assist my two children into getting into a property. Can you expand on the family pledge home loan as they both have not got a deposit or another product in which I can assist with them getting into the property market?
Thanks.
Hi Keith,
Thank you for getting in touch with Finder.
You can assist your kids to get a deposit together. For example, the child saves 5% or 10% of a property’s value, and the parent can use the equity in their house to cover the other 10-15%. The child pays back the whole loan (including the amount guaranteed by the parent). Once the parent’s part of the deposit is repaid by the child, the parent/guarantor is usually free from any other debt even if the child can’t repay the rest. But the big risk is if the child can’t repay the loan (including deposit) the parent/guarantor may have to repay it.
Please refer to our guarantor home loans guide for more details and to compare your options.
I hope this helps.
Thank you and have a wonderful day!
Cheers,
Jeni
Good afternoon!
I am a small investor and have two rented properties. I am enquiring as to what the average percentage rate should be on a current loan please.
Hi Rexjay,
Thank you for getting in touch with Finder.
You may compare a range of investment home loans. On the page are a comparison table you can use to enter your loan amount and the loan term then click the ‘Calculate’ button to start comparing your loan options. As of this writing, the comparison rate starts from 3.99% to 5.35%.
I also suggest that you seek help from a mortgage broker since you’re looking for providers that offer the cheapest rate.
I hope this helps.
Thank you and have a wonderful day!
Cheers,
Jeni