August home loan snapshot: More rates starting with ‘1’ hit the market

houses-in-bondi

Changes to home loan interest rates may be slowing but competition among lenders is alive and well with averages continuing to fall and some of the sharpest offers ever seen hitting the market in recent weeks.

Those are the big takeaways from the latest Mozo banking roundup which provides an overview of the major changes that were made to fixed and variable mortgage rates in July.

So which rate changes are making headlines, who are the lenders who have joined the ‘1% club’ with rates below 2.00% and what can borrowers expect in August? Read on.

Fixed rates: Homestar leads the way with new offer

According to the roundup, changes to fixed rates have started to slow in the past month, though cuts still overwhelmingly outweigh the small number of increases recorded.

Perhaps the most notable change of the month was the launch of online lender Homestar’s new Star Classic Fixed Home Loan offer which captured top spot as the lowest fixed rate currently in the Mozo database.

The loan comes with a 1-year fixed rate of just 1.98% (2.51% comparison rate*) for owner- occupiers and a competitive revert rate of 2.49%, though it’s only available for a limited time.

Among other changes of note: 

  • UBank cut 15 basis points off select fixed rate offers for all borrowers which means the UHomeLoan (Fixed) 3-year fixed rate deal now sits at just 2.14% (2.41% comparison rate*).
  • For investors, HSBC took 26 - 41 basis points off its unpackaged investment rates, leaving the 2-year rate on the Fixed Rate Home Loan at just 2.39% (3.29% comparison rate*) for those making principal and interest repayments.

To put these changes into context, here are the five lowest rates in the Mozo database as well as our fixed rate averages as of August 4, 2020:

TermRate leaderFixed rateAverage
1-yearHomestar1.98% (2.51% comparison rate*)2.58%
2-yearHomestar2.06% (2.49% comparison rate*)2.54%
3-yearUBank2.14% (2.41% comparison rate*)2.62%
4-yearHSBC2.40% (3.13% comparison rate*)2.94%
5-yearING & Police Bank2.59% (3.52% & 2.79% comparison rates*)2.96%

Variable rates: loans.com.au break the ‘1’ barrier

According to the latest banking roundup, the same trend also continued to play out in the variable rate market with lenders competing for borrowers by cutting their headline rates lower and lower.

As a result, the average variable rate in the Mozo database (based on a $400,000, owner- occupier loan being paid off over 30 years) has edged lower to 3.40% - a 2 basis point reduction on last month’s average. 

And once again it was an online lender that stole the headlines with a remarkably low rate - albeit, one which lasts for a limited time.

Featuring an introductory rate of just 1.99% (2.55% comparison rate*) for the first year, the new Smart Booster Discount Variable Home Loan from loans.com.au is the first variable rate in the Mozo database to dip below 2.00%. Once that year is over, the revert rate is 2.57%. 

Among the other significant changes: 

  • Macquarie trimmed rates for those making principal and interest repayments by 5 - 15 basis points, which means the variable rate on its Basic Home Loan is now as low as 2.59% (2.59% comparison rate*).
  • UBank’s UHomeLoan - Discount Offer now sits at just 2.49% (2.49% comparison rate*) after the bank reduced variable rates by 10 basis points. 

Home loan outlook

So what lies ahead for home loan rates?

According to Mozo Banking Expert, Peter Marshall, we might be approaching a period of greater rate stability after four months of turbulence following the RBA’s double rate cut in March. However, that doesn’t mean that competition amongst lenders will stop. 

“I think that there will still be lots of competition in the market, particularly around short term fixed rates in order to get people in the door, but we’re probably starting to reach a point where rates have largely settled,” he said.

“Lenders will still be looking at their headline rates and wondering how sharp they need to make them in order to compete with the market-leading rates out there that are less than 2.00%.”

RELATED: Mortgage lenders up the ante with low rates and money back offers

Is your own mortgage rate up to scratch? Find out for yourself by comparing it to the latest rates featured in the Mozo home loan comparison tables, or get started straight away by casting your eyes over some of the hot rates in the table below.

Compare home loans - rates updated daily

Search promoted home loans below or do a full Mozo database search. Advertiser disclosure.
  • placeholder
    Mozo Experts Choice 2021
    Smart Booster Home Loan

    2 Year Discounted Variable Rate, Owner Occupier, Principal & Interest, <80% LVR

    interest rate
    comparison rate
    Initial monthly repayment
    1.85% p.a.variable for 24 months and then 2.25% p.a. variable
    2.21% p.a.
    Go to site
    Details
  • placeholder
    Mozo Experts Choice 2021
    UHomeLoan - Discount Offer

    Owner Occupier, Principal & Interest

    interest rate
    comparison rate
    Initial monthly repayment
    2.19% p.a. variable
    2.19% p.a.
    Go to site
    Details
  • placeholder
    Mozo Experts Choice 2021
    Celebrate Variable Home Loan

    <60% LVR, Owner Occupier, Principal & Interest

    interest rate
    comparison rate
    Initial monthly repayment
    1.99% p.a. variable
    1.99% p.a.
    Go to site
    Details
  • placeholder
    Variable Home Loan

    Owner Occupier, Principal & Interest

    interest rate
    comparison rate
    Initial monthly repayment
    1.99% p.a. variable
    1.99% p.a.
    Go to site
    Details
  • placeholder
    Basic Home Loan

    Owner Occupier, LVR<60%, Principal & Interest

    interest rate
    comparison rate
    Initial monthly repayment
    2.14% p.a. variable
    2.14% p.a.
    Go to site
    Details

* WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate displayed is for a secured loan with monthly principal and interest repayments for $150,000 over 25 years.

** Initial monthly repayment figures are estimates only, based on the advertised rate, loan amount and term entered. Rates, fees and charges and therefore the total cost of the loan may vary depending on your loan amount, loan term, and credit history. Actual repayments will depend on your individual circumstances and interest rate changes.

^See information about the Mozo Experts Choice Home Loan Awards

Mozo provides general product information. We don't consider your personal objectives, financial situation or needs and we aren't recommending any specific product to you. You should make your own decision after reading the PDS or offer documentation, or seeking independent advice.

While we pride ourselves on covering a wide range of products, we don't cover every product in the market. If you decide to apply for a product through our website, you will be dealing directly with the provider of that product and not with Mozo.