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Top 5 cheapest variable home loans in Australia

Compilation image of 4 images: couple standing in front of a house, miniature house figure on top of a pile of coins beside a calculator, pile of Australian dollars and people walking across a crowded street.
With cash rate cuts predicted in mid-2023, it would be a bad idea to fix your home loan right now. (Source: Getty) (Samantha Menzies)

A $380 billion refinance race is on across the country.

Repayments on the average $611,158 home loan are up more than $600 in four months… or they soon will be.

That’s the effect of the seven rate rises we have already seen. And, if you believe the money markets, there are six more to come.

It all has a lot of Aussies frantically fixing their home loan rates.

But stop.

Read more from Nicole Pedersen-McKinnon:

The other piece of vital information that the money markets are telling us is that this hike-cycle will peak in the middle of next year and then rates will actually start to fall.


Adding weight to this futures forecast is the fact several large lenders last week dramatically cut their longer term fixed rates.

Most of the cuts were for four-year periods and beyond, with CBA lopping 1.6 percentage points off the top, to a rate of 4.99 per cent.

That’s well below its headline package variable rate of 5.6 per cent.

But remember, you should be getting a discount from that headline rate.

The bottom line is that with any fix now, your repayments will likely initially be larger than the variable rate.

And if the cash rate only has a little bit higher to go, as the market thinks right now, you may well be stuck paying more for the duration of a fix.

So how can you cut your variable costs?

The cheapest variable rates in the country

An under-the-table, unpublished discount from a big bank is unlikely to ever match the what-you-see-is-what-you-get rate of the best lender on the market.

The fact is that the pandemic mortgage price war has created a massive gulf between the big four variable rates and the cheapest, still-quality loans in the market.

With the 50-basis-point rate rise from last Tuesday yet to flow through to most products, the Big 4 average discounted rate is still 4.7 per cent (all four banks have announced a straight 50 basis point increase).

That’s a full 161 basis points above the cheapest loan with an offset account, 3.09 per cent (this will increase 50 basis points too).

That is a $540 difference on the average monthly mortgage repayment.

So, a simple refinance almost entirely wipes the hikes the Reserve Bank of Australia (RBA) has imposed so far.

Australia’s 5 best-value variable rate loans

I asked for a table of the cheapest loans issued by, or that are backed by, authorised deposit-taking institutions (ADI’s).

But remember, you can expect all to be 50 basis points more expensive once last week’s RBA move is passed through.

The 5 cheapest home loans in the country*

1. Tic:Toc 3.09%

2. Great Southern Bank 3.14%

3. uBank 3.14%

4. Well Money 3.19%

5. Macquarie 3.19%

Source:, as at August 7, 2022.

*From lenders backed by authorised deposit-taking institutions.

So, what’s the fuss about ADIs?

There are cheaper loans out there. But those cheaper loans are issued by non-banks that do not have the authority to take deposits.

This means that any offset account they advertise is not a real, quarantined one.

Instead, these products are all-in-one style, with all the money going into the one home loan pot.

That means the offset account is really a redraw in disguise.

The problem is that this leaves you at the mercy of the money you place in it being subsumed into your loan by a lender recalculation - remember ME Bank’s (swiftly reversed) move when coronavirus hit?

It also leaves you vulnerable to a bank refusing a redraw if you get into financial trouble.

And that’s hardly the point when it is a smart strategy to park your emergency money – or holy sh*t fund, as I call it – in your mortgage offset account so that you save loan interest.

The lenders in the above list, even though you might not have heard of some of them, are backed by banks. But they cut their costs, often, by being online-only.

For some, you pay $10 a month for the addition of an offset account.

This is, again, far better value than the big banks’ annual package fee, which is usually $300.

You also may not need the other products with which the package comes.

And they are usually far from best-of-breed.

What a refinance would save you

Jump on my free app, My Mortgage Freedom Date, to calculate just how much a refinance would save you.

It also allows you to automatically calculate how much interest you would ultimately stash - and time you would slash - if there is any way you could keep your repayments at their existing level.

It’s a hugely powerful debt-reduction strategy that I call “up stumps” but still “stump up”.

And the average saving on the average $611,158 mortgage today – if you can forgo that $540 a month – is an enormous $224,403… and mortgage-freedom more than five years early.

At which point you will be entirely out of harm’s way of the RBA.

Nicole Pedersen-McKinnon is the author of How to Get Mortgage-Free Like Me, available at Follow Nicole on Facebook, Twitter and Instagram.

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