A race to the bottom - the five home loan lenders slashing rates

Since the start of the year, many Aussie homeowners have felt the pinch from variable home loan rate rises, especially from the major banks. But the trend toward hiking rates could be about to change thanks to moves by challenger lenders and smaller banks. 

New kid on the block, Athena, kickstarted the trend, taking the nation by storm last week with a 3.49% variable rate (3.51% comparison rate*) and a mission to get Aussie homeowners debt-free. The online lender calls itself a ‘home loan wrecker’ and encourages borrowers to pay off their mortgage as fast as they can so they can enjoy their home.

Then yesterday, veteran online lender, loans.com.au, launched their Smart Home Loan and took the lead with a competitive variable rate of 3.48% (3.50% comparison rate*). When compared to the average variable rate in the Mozo database, the Smart Home Loan would see homeowners save $2,364 a year for a $400,000 loan over 30 years.

The lenders slashing rates 

Kogan Money has announced a 0.10% cut to the variable rate on its Essential Home Loan to 3.59% (3.60% comparison rate*) for owner occupiers. Kogan - which you might be more familiar with when it comes to cheap electronics - branched out into home loans last year, and is funded by Adelaide Bank and Pepper Group who together have over 40 years experience in financial services.

“We’ve always seen online lenders lead the pack with competitive products, and with more and more online lenders like loans.com.au and Kogan Money, shaking up the market with competitive rates, we may start seeing major banks follow in their footsteps, ” said Mozo Director, Kirsty Lamont.

In fact, NAB has now made changes to its Base Variable Home Loan special, cutting it’s rate by 20 basis points to 3.79% (3.83% comparison rate*) for owner occupiers borrowing with a 20% deposit.

“What we’re starting to notice in our database is that lenders are often choosing to cut their lowest base rate product. It really is a race to see who can entice customers with the lowest rate offering,” said Lamont.

But it’s not just innovative lenders causing a stir in the home loan market. There have also been rate reductions on the lowest rate products from three more established lenders since the start of February, two of which made decreases by 10 basis points:

- Bank of Sydney, BOSBasic, 3.55% (3.62% comparison rate*)

- State Custodians, Low Rate Home Loan with Offset, 3.58% (3.59% comparison rate*)

- Suncorp, Back to Basics Special, 3.69% (3.70% comparison rate*)

“The big banks have been hiking rates, citing funding pressures as the main reason. It’ll be interesting to see if they respond to these new rock bottom offers from challenger lenders with better deals of their own,” said Lamont.

“And if your bank isn’t willing to match or compete with the new offers, it might be time for homeowners to make the switch.”

So if you think you could be on a better deal with your home loan, head on over to our home loan comparison tool to compare a range of offers today.