Owner occupier mortgage market heats up with rates under 4%

Owner occupier mortgage market heats up with rates under 4%

Now more than ever is a great time to be an owner occupier. Over the year, the home loan market has seen huge changes with banks and financial providers increasing interest rates for investors and tightening deposit restrictions, whilst lowering rates for owner occupiers.

The reason for this shift is due to APRA’s recommendations that lenders reduce their investor loan books to under 10% growth per annum. Of course banks need to make a profit, so in order to attract those owner occupiers looking to buy or refinance they are offering great deals – yep the owner occupier market is heating up!

To give you an idea of how much you could potentially save, below is a comparison of the average variable rate in our database of 4.69% put against the home loan deals available for owner occupiers under 4%.

Scenario 1 – $300,000 home loan over 25 years

Home loan package Interest rate Monthly repayments Interest paid over 25 years
Average variable rate loan for owner occupiers 4.69% $1,700 $210,005
Mortgage House Discounted Variable Home Loan – Summer Offer 3.79% for 12 months, then reverts to 3.99% (4.01% comparison rate), Initial payments: $1,549

Subsequent payments: $1,581

$173,847
iMortgage Fusion 3.84% variable rate (4.00% comparison rate) $1,557 $167,138
Click Loans The Online Home Loan 3.91% variable rate (3.92% comparison rate) $1,569 $170,592
UBank UHomeLoan – Spring Offer 3.99% variable rate (3.99% comparison rate) $1,582 $174,556

Scenario 2 – $500,000 home loan over 25 years

Home loan package Interest rate Monthly repayments Interest paid over 25 years
Average variable rate loan for owner occupiers 4.69% $2,833 $350,008
Mortgage House Discounted Variable Home Loan – Summer Offer 3.79% for 12 months, then reverts to 3.99% (4.01% comparison rate), Initial payments: $2,582

Subsequent payments: $2,635

$289,745
iMortgage Fusion 3.84% variable rate (4.00% comparison rate) $2,595 $278,564
Click Loans The Online Home Loan 3.91% variable rate (3.92% comparison rate) $2,614 $284,320
UBank UHomeLoan – Spring Offer 3.99% variable rate (3.99% comparison rate) $2,636 $290,927

Scenario 3 – $750,000 home loan over 25 years

Home loan package Interest rate Monthly repayments Interest paid over 25 years
Average variable rate loan for owner occupiers 4.69% $4,250 $525,011
Mortgage House Discounted Variable Home Loan – Summer Offer 3.79% for 12 months, then reverts to 3.99% (4.01% comparison rate), Initial payments: $3,872

Subsequent payments: $3,952

$434,618
iMortgage Fusion 3.84% variable rate (4.00% comparison rate) $3,893 $417,846
Click Loans The Online Home Loan 3.91% variable rate (3.92% comparison rate) $3,922 $426,480
UBank UHomeLoan – Spring Offer 3.99% variable rate (3.99% comparison rate) $3,955 $436,391

As you can see from the tables above even a rate variation of under 1% can make a significant difference to the amount you pay each month in repayments and the interest charged over the term of the loan.

Just take scenario 3 of a $750,000 loan paid back over 25 years. If you were signed up with the average variable rate available for owner occupiers of 4.69% you would pay a whopping $525,011 in interest over the life of the loan. Whereas with the lower rate 3.84% available through iMortgage’s Fusion home loan you’d only pay $417,846 – that’s a difference of $107,165, more than enough to pay for a home renovation or new family car!

Tips for finding the right home loan

Of course, if you’re looking for a home loan or thinking of refinancing from your current provider, there is more to look out for than just a great rate. Here are three important factors to consider:

  1. Upfront fees:

When you apply for a home loan you may be charged an application fee and once you’re approved for the loan other upfront fees may apply like a legal, valuation and settlement fee. An important thing to remember about these fees, is they are not set in stone and you can always try your hand at haggling these down or getting them wiped altogether by offering to bring your other financial products to the table like your bank account and credit card. If haggling isn’t your thing, you can always speak to Mozo’s expert home loan negotiator who will negotiate with the banks for free on your behalf.

  1. Ongoing fees

On top of paying some upfront fees, you may also be charged an ongoing service fee. Make sure this is competitive as a high service fee could end up negating the savings made by the low interest rate.

  1. Flexible features

You may assume that the best way to save yourself paying a large amount of interest is through a great rate but did you know you could slash that amount even further through taking out a home loan that allows you to make additional payments on your loan? Say you have a loan amount of $500,000 and go for Click Loan’s 3.91% low rate loan. Making an extra repayment of $200 a month over a 25 year period would save you $36,999 in interest and reduce the life of the loan by 2 years and 10 months. Other features to look out for on your home loan search include an offset account, redraw facility and repayment flexibility (e.g ability to set up your repayments weekly, fortnightly or monthly).

Want to see more competitive home loan deals? Search our entire database using our home loan comparison tool here.

Owner occupier mortgage market heats up with rates under 4% was last modified: October 12, 2015 by Rebeccah Elley

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  1. Some nice information here. Glad to know about the new Mortgage House Discounted Variable Home Loan – Summer Offer…

    Thanks

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