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0.21% lower: Lenders offering home loan discounts

·Personal Finance Editor
·3-min read
Australian $100 notes stacked on top of each other and an aerial view of an Australian suburb to represent home loan prices.
Borrowers can get a discount on their loan repayments depending on how much of their home they own. (Source: Getty)

Interest rates are expected to leap again tomorrow after three consecutive increases since May, but homeowners can still get a discount on their loan.

Almost one in two lenders are pricing for risk in the current interest-rate-hiking cycle by offering lower-rate loans to borrowers with large deposits or high equity, according to new research from Canstar.

For borrowers with a 40 per cent deposit, or the equivalent equity in their property, the research found 49 per cent of lenders were offering interest rates that were, on average, 0.21 per cent below the rate being paid by borrowers with a deposit half that size.

Almost one third (29 per cent) of lenders were also offering discounts to borrowers with a 30 per cent deposit or similar equity in the property, however, the average discount was much lower, at 0.13 per cent.

“With the outlook for continued economic growth clouded in the face of rising interest rates, it is not surprising that lenders are competing harder for lower-risk borrowers,” Canstar finance expert Steve Mickenbecker said.

Property prices are widely expected to fall by 10-20 per cent, which would see 80 per cent loan-to-value-ratio (LVR) loans too close for comfort to zero equity.

“Lenders are looking for loans where there is a greater buffer for falls in property prices and almost half of them are rewarding these borrowers with lower interest rate offers.”

Mickenbecker said due to strong house price increases over the past couple of years, many borrowers who had held their property for several years would likely own a healthy share.

“There may be a strong case for borrowers in this position to open up a negotiation with their lenders for a rate reduction,” he said.

“Even after allowing for the high-equity discounts, there are still likely to be better rates available for borrowers who cast their net wider than their current lender.”

With the lowest rate available still 0.69 per cent below the average for lenders offering a discount for 60 per cent LVR loans, Mickenbecker said the rewards were compelling enough to consider making the switch.

Top 5 lowest variable home loan rates

60% LVR

Company

Loan

Rate

Comparison Rate

Bank of us

FlexiDiscount 80%

2.79%

2.81%

Credit Union SA

Variable Home Loan Package Special Offer P&I

2.84%

3.26%

Qudos Bank

No Frills Home Loan P&I 70%

2.99%

2.99%

Hume Bank

liteBlue Variable P&I ≤60%

2.99%

3.02%

Community First CU

Accelerator Package Home Loan P&I

2.99%

3.42%

70% LVR

Company

Loan

Rate

Comparison Rate

Bank of us

FlexiDiscount 80%

2.79%

2.81%

Credit Union SA

Variable Home Loan Package Special Offer P&I

2.84%

3.26%

Qudos Bank

No Frills Home Loan P&I 70%

2.99%

2.99%

Community First CU

Accelerator Package Home Loan P&I

2.99%

3.42%

Orange Credit Union

Essential Introductory 2 yrs

2.99%

3.99%

80% LVR

Company

Loan

Rate

Comparison Rate

Bank of us

FlexiDiscount 80%

2.79%

2.81%

Credit Union SA

Variable Home Loan Package Special Offer P&I

2.84%

3.26%

Community First CU

Accelerator Package Home Loan P&I

2.99%

3.42%

Orange Credit Union

Essential Introductory 2 yrs

2.99%

3.99%

Australian Mutual Bank

Basic Variable Home Loan

3.04%

3.10%

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