Home Loans:

There wasn’t much movement in home loan rates in January which was expected after all the activity responding to the two rate cuts last year.  Instead we saw some trimming of variable rates and jockeying for the title of lowest fixed rates.

Most of the variable rate action occurred in package rates rather than standard variable offerings. Non-bank lender Better Option joined the bunch of lenders matching UBank’s UHome Loan 6.14% rate, but new kid on the block, My Mortgage Freedom, retained the cheapest variable rate at 6.10%.

Previous market leader Greater Building Society increased its 1 year fixed package rate from 5.69% to 5.84%, leaving the best fixed rates for loans of $300,000 to Better Option, Newcastle Permanent and Reduce Home Loans – all at 5.79%.

Personal Loans:

Finally some movement in Personal Loan rates as the RBA cuts slowly start to flow through. Westpac seems intent on becoming more competitive in the personal loan space, cutting rates across its personal loan products.  The Westpac Personal Flexi Loan rate was slashed by 1.70% to 12.99% and its Unsecured Fixed rate was cut to 13.99%.

This still leaves them some way off the pace compared with other lenders though with a range of options near or below 13.0%. For example, Newcastle Permanent cut their Unsecured Fixed rate from 12.99% to 12.74%.

Credit Cards:

All of the competition in Credit Cards seems to be focused on low rate cards while customers with rewards credit cards have seen precious little of the RBA cuts.

Community First’s McGrath Pink Visa card is the only card on our site with a rate under 10% after they passed on both of last year’s RBA cuts. The card was at 10.49% but is now down at 9.99%. Of the major banks, NAB’s cut of 0.25% taking its Low Rate card to 13.24% is the only change we’ve seen. In the Rewards category Jetstar’s Mastercard rate was cut from 13.99% to 13.49%, although the rate reflects the card’s much lower earn rate than most cards with rewards.

Savings Accounts:

The biggest move in Savings Accounts during January was RaboDirect’s decision to return to offering an introductory rate. The RaboDirect High Interest Savings now pays 6.01% for the first four months, dropping back to 5.4% after that.  UBank headed in the opposite direction, shaving 0.1% off its headline rate to 6.01% (deposit conditions apply).

Overall we’ve had two cash rate cuts in the last 12 months totaling 50 basis points, yet the average rate on savings accounts has come down only 36 basis points, so there are still plenty of appealing deals on offer. Check them out using our Savings Account comparison tool.

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The banks have been making noises warning that they may not pass on future rate cuts so all eyes will be on the February RBA meeting today to see what they do. Regardless, from what we have seen over the past few months, many people with credit cards and personal loans have already been left in the cold with little or no benefit from falling rates.

Home Loans:

The only lender that didn’t pass on the full 25 basis point RBA rate cut in December was RAMS which only passed on a 20 basis point reduction. RAMS has been busy repositioning itself as a full financial services provider with the launch of new deposit accounts late in 2011 (see the Savings Account section of this article for more).

UBank (the online subsidiary of NAB) currently offers the best variable home loan rate as its usual requirement of having the loan for 3 years to receive a loyalty discount of 0.20% continues to be waived. We’re not sure how long this will last, but applicants currently get the discount for the life of the loan with no waiting period meaning the variable rate is just 6.14%, compared with an average standard variable rate across the market of 6.94%. The offer is a little restricted though as their loans are only available to people refinancing and not new loans.

Fixed home loan rates stopped falling in December unlike previous months when we had seen quite large movements. The average 1 and 3 year fixed rate were down about 10 basis points, and there was virtually no movement in fixed rates from the major banks.

Personal Loans:

Despite the two rate cuts late last year there has been little benefit passed on to personal loan customers. The average secured variable rate loan has only moved down 11 basis points over the past year, and unsecured variable rates have actually gone up! The best rates are offered by credit unions, whether looking at secured or unsecured.

Credit Cards:

As for personal loans, credit card customers have every right to feel they are getting a raw deal. The average credit card rates barely moved in December and even over the longer term are fairly static. Last month this blog singled out QANTAS Staff Credit Union for an honourable mention, having passed on November’s rate cut to their credit card customers, and they’ve done it again in December. Its Lifestyle Rewarder is one of the cheapest credit cards with rewards on the market, now at 13.49%.

Savings Accounts:

The heat has certainly come out of the savings account market with the average rate down 39 basis points in December alone, although some of this decrease may have been due to delays in passing on the November rate cut.

The best introductory rate accounts are currently offered by RAMS (6.12% but only to RAMS home loan customers) and UBank (6.11%). Interestingly these are both owned by major banks – Westpac and NAB respectively – so it seems there is real competition between the majors, but through their alternate brands more than their own. ANZ is taking a different approach, offering the third best rate in the market of 6.00%, but through its own brand rather than its online Smartypig brand.

Term Deposits:

There are still some great term deposit rates to be found as they haven’t been falling as fast as either at-call deposits or home loans. If the RBA continues its downward movement of the cash rate over the next few months now might be a good time to pull some money out of at-call accounts and have some assurance of your interest rate.

The best 6 month rates at the time of writing were UBank’s 6.11% and ING Direct’s 6.00% while the best 1 year deposit rate is 5.50% offered by Police Credit Victoria and Credit UnionSA, and a range of others close behind. Check out our Term Deposit selector tool to find the best rates for the term that you’re interested in.

Although the RBA has a month off from meeting to review the cash rate in January the Mozo RateChasers will be keeping a keen watch to see if the banks are going to do the right thing and pass on the same reductions to credit card and personal loan customers as the have for those with home loans.

Some top stand-out products have been released throughout the year, with many bank accounts, home loans and credit cards receiving a big thumbs up. However, with every great product, a not so great product slips its way into the market. And for those that don’t make the grade, the Mozo team has our wooden spoon ready!

Best Bank Account
We love anything fee-free! Launched this year, the Citibank Plus Transaction Account ticks all the boxes for a great everyday banking account. The account has no monthly account fees, and fee free ATM withdrawals within the Citibank network in Australia which includes Citibank, Westpac and St George ATMs. But the real game changer is that this bank account has no overseas ATM or purchase fees (these can be as high as $5 per transaction with some accounts) which makes this a great bank account for jetsetters and homebodies alike!

Some banking providers missed the fee-free memo this year! The Wooden Spoon Award goes to HSBC for its Savings Cheque Account. Not only are customers charged a $7.50 account fee (waived if the balance is always over $1000), the account only has six free ATM and Eftpos transactions a month, after which you are charged $2 for every other transaction. Ouch!

Best High Interest Savings Account
And the best savings account goes to… RaboDirect! Unlike other banks who only offer high interest rates for the first few months to new customers, RaboDirect’s High Interest Savings Account rewards savers with a competitive ongoing interest rate of 5.75% (with balances of up to $200,000). The savings account has other great features such as no minimum balances and no account fees.

The normally fantastic Bankwest has landed itself a Wooden Spoon Award for its Regular Saver Account. The savings account has a high interest rate of 6.50%, but the fine print reveals that you can only get this rate by depositing between $50 and $500 each month. What’s more, after a year the entire balance is swept to a nominated account so you have to start building your balance again!

Best Rewards Credit Card
This year our vote goes to the Qantas Amex Discovery Card for the best rewards credit card. It is one of the few cards that will earn you 1 Qantas Frequent Flyer point for every $1 you spend on the card and it has no limit on the number of points you can earn in a year.  But best of all the Qantas Amex Discovery Card has no annual fee. When you consider most rewards cards have annual fees of around $150 this is a great saving which you can put towards your holiday spending.

Best Credit Card
Aussies love to travel and with the increased popularity of online shopping, finding the best credit card for you can make a huge difference to your finances. The 28 Degrees MasterCard has some great features for savvy travelers and shoppers which puts it at the top of our list:

- 100% free to use in Australia and overseas
- No overseas transaction or foreign currency conversion fees
-You can put credit in it before you start your trip.

Not to its usual great standard, Macquarie Bank increased its RateSaver and Gold credit cards by 0.25% after the RBA cut in November earning it our Wooden Spoon Award.

Best Mortgages
Loans.com.au and State Custodians are small players offering big savings in the home loan market! By not using brokers they’re able to offer competitive rates direct to borrowers – up to 0.75% below the average standard variable rate . You’ll have to spend time filling out the paperwork but the savings you’ll make will be worth it.  For example, if your current home loan is with Westpac on the Rocket Repay Home Loan at 7.61% ($300,000 over 25 years), you can save over 70K by switching to these low rate providers.

The ‘fixed rate revert rort’ is a sneaky tactic by banks. They provide low fixed rates for the first few years and then revert to high variable rates once the fixed period is over. Citibank gets our wooden spoon for its fixed rate loans. For instance its 3 year fixed rate of 5.94% reverts to 7.77% for the rest of the loan.

Finding the right product in 2012
With so many products in the market, the search for the right credit card, bank account or home loan may seem daunting but Mozo has all the tools you need to tease out the “gotcha’s” and find the best deal! Head to Mozo now >>>

Home Loans:

Most lenders have now moved their variable rates following the Reserve Bank’s reduction in the cash rate early in the month. The only bank not to cut its variable rates by the full 25 basis points was NAB who, although still having the lowest standard variable rate of the big 4 banks (now 7.47%), only took 20 basis points off its rates. Perhaps to balance this NAB’s online subsidiary UBank has jumped in with one of the lowest variable rates around at 6.39% with its UHome Loan. Usually borrowers would have to pay 0.20% more than this for the first 3 years before qualifying for the ‘loyalty’ discount, but UBank is now offering this discounted rate to its first 1,000 successful applications.

Fixed rates continued to fall during the month with quite a few 1, 2 and 3 year options at around 6.0%. Better Option offered the best 1 year rate at 5.84% and the best 3 year rate at 5.89%, while Greater Building Society had the sharpest 2 year rate at 5.94%.

Personal Loans:

Unlike home loans, many personal loan rates have not yet benefitted from the Reserve Bank rate cut as evidenced by the average secured variable rate only coming down 8 basis points during November to 10.79%. The main area for competition in personal loans has been the fixed rates on secured loans where a number of lenders have passed on the full rate cut. Over the month we saw the average rate fall from 10.88% to 10.74%, with a range of offers coming in under 9%.

Credit Cards:

This is the product group that has benefited least from rate adjustments and during November the average rates barely moved. For credit cards with rewards the average rate went from 19.54% to 19.52%, and for cards without rewards the average rate went from 15.06% to 15.03%.

Qantas Staff Credit Union customers with its Lifestyle credit card have a reason to smile – its already low purchase rate of 13.99% was reduced to 13.74%, one of the few credit cards with a rewards program to feel the full effects of the lower cash rate.

Of the big banks, the only change we saw was ANZ cutting the rate on its Low Rate card by the full 25 basis points to 13.24%, although the rates on all of its other cards have not been adjusted.

Savings Accounts:

Unlike personal loans and credit cards, there’s been no hesitation in passing the rate cut on to savings account customers. During November the average rate fell by a neat 25 basis points, but this hasn’t been uniform across all products.

The market leaders for introductory rates for online savings accounts, UBank and Virgin Money cut their rates by 40 and 39 basis points respectively, leaving Virgin Saver on 6.12% and USaver on 6.11%. Both of these accounts are now beaten by HSBC’s Serious Saver on 6.20%, but as with all high introductory offers it pays to check what rates are paid beyond the introductory period.

Term Deposits:

As markets are anticipating more rate cuts and competition for deposits is easing, term deposit rates are continuing to move down.  Only small premiums are being paid for locking your money away for longer terms at the moment, making shorter terms seem the best value.

Over the last year the average rate for 6 month deposits has only fallen 9 basis points, however the average 1 year rate is down 71 basis points and the average 3 year rate has fallen 85 basis points.

For deposits of $10,000, the average 1 year rate is 5.22% but the best rate in November was QANTAS Staff Credit Union’s 5.70%.  For 3 year deposits the average rate is 5.34% and the best rate was 6.00% from Bank of Cyprus. Bank of Cyprus also payed 6.00% for 6 months.

The Mozo Rate Chasers will be keeping a close eye on whether the banks eventually pass the rate cut on to their credit card customers, and who benefits (and who misses out) if there’s another cut when the RBA meets on December 6. Whatever happens in the world of rates, we’ll have all the latest here.

While the Reserve Bank this month dropped the official cash rate, fixed rate home loans have been coming down for a number of months. There are still some great opportunities for borrowers to lock in a rate that is lower than where variable rates currently sit.

Fixing is not for everyone but it provides certainty that you don’t get with variable rates. You won’t benefit from any further reductions in rates, but you’re insulated against any increases affecting your rate or repayment amount until your fixed term expires.

When it does expire you’ll have a choice of re-fixing or reverting to a variable rate.

What is the “Revert Rate Rort”?

If you don’t re-fix when your fixed term expires you will revert to a variable rate. You need to be aware that unless you’ve already been paying a yearly fee on your loan, most lenders don’t roll you on to their most competitive variable rate. More often than not, you’ll end up on their most expensive (standard variable) rate. Ouch!

It is unfair that an existing customer coming out of a fixed rate should be dumped onto a rate rarely sold to new customers. If you’re lucky, you may have an opportunity to convert to a cheaper variable product but it typically won’t happen unless you initiate the process and you may have to pay a fee to do so. Check these details before you sign up for your fixed rate loan. Ask your lender what rate you will revert to at the end of your fixed rate loan.

The Greater’s Great Rate Fixed Rate Home Loan and Ultimate Fixed Home Loan both automatically revert to rates lower than our standard variable rate (at no cost) should a borrower choose not to re-fix.

This is one of the reasons why the comparison rates on our fixed rate loans are usually much lower than our competitors, even if the headline (advertised) rate isn’t. Remember to always look at the comparison rate when choosing a loan. Mozo lists comparison rates as well as advertised rates.

About David

David Bryde is a Mozo Answers Industry Insider and Product Manager for the winner of Mozo’s 2011 People’s Choice Award for Best Home Loan Provider, Best Saving Account Provider and Best Building Society, Greater Building Society. He also contributes to the Greater’s Blog.

In home loans, fixed rates led the way down. At the end of September, the average 1 year rate was 6.62%, 28 basis points below where it was in August, and the average 3 year fixed rate 43 basis points lower to 6.59% over the same period. All of the major banks reduced their fixed rates in September – the biggest 1 year fixed movement was Westpac slashing its rate by half a percent to 6.69%, and NAB cut its three year rate by 45 basis points to 6.64%.

The best 1 year fixed rate for home loans of $300,000 is Greater Building Society’s 5.89%, 40 basis points lower than a month ago (which was then the lowest 1 year fixed). loans.com.au took the title of cheapest variable rate loan in the market with its dream catcher home loan, dropping from 6.69% to 6.58%.

Term Deposit rates are also on their way down, with both the market average and the best 1 year rate down by about 15 basis points. At the end of September the average 1 year rate was 5.54% and the best in the market was Beirut Hellenic Bank at 6.10%. The major banks are pulling their rates back too.  ANZ had the biggest drop in any of the big four 1 year rates over the month, a 42 basis point reduction to 5.18% .

Competition in the online savings account area has been running hot for the last year, and over the 12 months to the end of September the average Savings Account rate increased by 35 basis points, 10 basis points more than last November’s RBA cash rate increase. Going against the trend, and perhaps a sign of things to come, Westpac cut the rate on its eSaver by 50 basis points to 4.80%.

The only positive online savings rate movement Mozo saw in September was RaboDirect increasing its bonus rate offer on its High Interest Savings Account by 0.01% so it could claim equal best rate in the market (with UBank and Virgin Money) at 6.51%.

What happens to a fixed rate on expiry?

Most fixed rate loans will roll on to a variable interest rate at the completion of the term but your financial institution should contact you prior to the expiry to talk about the options available to you. The options could include: fixing again for another term, moving to a variable rate (make sure the rate is competitive) or choosing a combination of part fixed and part variable.

Lisa suggested that before making a decision you should do some comparative shopping to make sure that your current provider is offering you the best solution for your financial situation.

Can I get a 100% home loan?

According to our industry insiders, 100% home loans are a thing of the past. You’ll need to demonstrate between 5 – 10% deposit as genuine savings.

Is there different lending criteria for investment property loans?

The good news is no. The same rates and criteria will apply for an investment loan as with owner occupied. If the property is going to generate an income that rental income is taken into consideration as well. Most lenders will take 80% of the rental income into consideration if the property is residential. Some will take 100% of the rent into account.

How much stamp duty will I need to pay?

The answer varies depending on what state you live in, the value of your property and whether or not you’re a first home buyer. Try using an online tool like Mozo’s stamp duty calculator to see what you’ll be up for.

Does good rental history count towards home loan approval?

Yes, according to Lisa lenders are starting to look at this more closely these days. A good rental history helps to illustrate your ability to service the home loan debt.

How much is too much to borrow for a home loan?

The resounding advice from the experts is that you need to balance your home ownership aspirations with your lifestyle. Do your homework (do up a budget) and only borrow as much that will allow you to be comfortable with the repayments now and into the future.

Do you have a question on home loans or other money matters? Head to Mozo Answers, Australia’s largest money conversation.

Aussie, ME Bank and the Greater Building Society have all advised of home loan fee increases from 1 July.

Aussie will increase the application fee on its variable rate home loans to $600, up from $250 – $500 depending on the loan type. Aussie’s fixed rate home loan fees are also rising by a total of $185.

ME Bank has introduced a new $150 legal fee and $150 valuation fee on its home loans, increasing its upfront fees by a total of $300, and the Greater Building Society will introduce a $500 application fee on all of its home loans.

The Government’s ban on exit fees was supposed to be a win for Australian homeowners and borrowers, making it easier to switch home loans and stimulate competition. But news that the smaller lenders have announced price increases, while the big banks have not, confirms fears that competition in the home loan market may be lessened not increased as a result of the exit fee ban.

Mozo’s top tip for new home loan borrowers

Use the comparison rate to check the true cost of a loan. Even if you are confronted by a large upfront fee, the interest rate is still the main factor in determining the overall cost of a loan.

Got a question on home loan fees? Ask the money mavens on Mozo Answers.