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Australia’s home loan market has witnessed its lowest rate on record, showing signs lenders are still willing to drop rates to attract new mortgages.
Customer-owned Greater Bank has dropped its one-year fixed rate to 1.69 per cent, the lowest owner-occupier loan on offer within Australia.
Greater Bank’s deal, which pays both principal and interest, is only available to customers in NSW, Queensland and the Australian Capital Territory.
RateCity research director Sally Tindall said while the one-year deal seemed highly lucrative, the revert rate was more than twice the cost.
The two loan schemes offered by the bank revert to an ongoing variable rate of 3.66 per cent and 3.46 per cent respectively.
“At 1.69 per cent this is the lowest home loan rate we’ve ever seen, but it’s important to remember that it only lasts for one year,” Ms Tindall said.
“While the revert rate is more than double the fixed rate, borrowers could still potentially be better off if they keep on their toes and refix, refinance or renegotiate after the first year.”
RateCity calculations show borrowers would be $3849 worse off over five years if they decided not to switch their loan with Greater Bank after the 1.69 per cent deal ends.
Smaller banks are dropping rates well below what the big four are offering in an attempt to try to claim as many customers within a crowded and competitive lending market.
Canstar money expert Effie Zahos said there was still a great deal of competition in the market, with rates expected to remain low for the next three years while the Reserve Bank holds its cash rate setting for the foreseeable future.
“Today’s move from Greater Bank proves competition is still rampant in the home lending space, and it may make sense to lock in either some or all of your home loan if you want to take advantage of these rock-bottom fixed rates before they swing the other way round,” she said.
“If you’re going to lock in a competitive rate for one year, then it’s important to understand the other rates on offer from that lender, as that’s what you will be facing at the end of the fixed term unless you are willing to move again.”
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