Yahoo Finance This small bank move could save you nearly $4,900 a year
NAB subsidiary UBank has announced the lowest fixed home loan rate in the country: 1.75 per cent.
The small bank announced on Friday it had reduced its three-year fixed rate for owner occupiers paying principal and interest by 0.2 per cent to the new figure, alongside a comparison rate of 2.2 per cent per annum.
However, hopeful home owners will have to get in quick: you can only apply for the rate until 26 February.
“This limited time offer is our lowest ever advertised interest rate,” UBank said in a statement.
But it’s not the only rate that has dropped; other fixed rates have also been reduced between 0.15 per cent and 0.35 percent per annum.
The new rate is only available to new customers, or those in the process of applying or settling their home loan with UBank, until 26 February this year.
After completing their application in full and receiving approval, customers will have to have their loan successfully settled within 90 days of submitting their application.
UBank chief executive Philippa Watson said customers should take advantage of interest rates which are at an “all-time low”.
The national interest rate is currently 0.1 per cent, the closest it’s ever been to 0 per cent in the nation’s history, and the Reserve Bank of Australia has indicated it is unlikely rates will move up for another three years.
“If you’ve been toying with the idea of fixing all or some of your home loan, then I encourage you to explore the most competitive rates, as you could be saving thousands,” said Watson.
According to RateCity analysis, those who refinance to this rate could potentially save $4,961 in the first year, and more than $15,000 over the three-year term.
No one should have a ‘3’ in front of their home loan rate, and UBank’s move is designed to get Australians into action, said RateCity research director Sally Tindall.
“Mortgage holders suffering from inertia are likely to be getting fleeced,” she said.
“Putting an expiry date on this deal could help combat complacency among mortgage holders.
Should I get a fixed rate?
Money and mortgage expert Nicole Pedersen-McKinnon warns that though interest rates are at a record-low and it may be tempting to get a fixed rate, it could also be a “trap”.
“Lenders en masse are luring customers with rock-bottom fixed rates but then slugging them on the variable rate to which the fixed rate ‘reverts’ and, of course, that rate for any variable portion of the loan,” she said.
“Of which there should be half.
“I believe you should only ever fix half a mortgage.”
If rates fall further and the variable rates drop even lower, you could remain stuck at your fixed rate.
But the more important reason why you shouldn’t fix your entire mortgage is that you aren’t able to make extra repayments on a fixed-rate loan, meaning you can’t save money or shorten your loan term, she said.
“So what’s the solution? A loan with both a low fixed-interest rate and a low variable rate, so you can execute a smart, saving fixed/variable split.”
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