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

By Tom Watson · · 3 min read
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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.

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Last updated 24 November 2024 Important disclosures and comparison rate warning*

Home loan comparisons on Mozo

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  • Unloan Variable

    • Owner Occupier
    • LVR <80%
    Interest rate
    5.99 % p.a.
    Variable
    Comparison rate
    5.90 % p.a.
    Initial monthly repayment
    $2,995
    Go to site

    Built by CommBank, the Unloan is the first home loan with an increasing discount (conditions apply) for borrowers. No application or banking fees. No monthly account keeping or early exit fees. Apply online in minutes.

  • Fixed Home Loan

    • Owner Occupier
    • Principal & Interest
    • LVR <95%
    Interest rate
    5.69 % p.a.
    Fixed 3 years
    Comparison rate
    6.28 % p.a.
    Initial monthly repayment
    $2,899
    Go to site

    Get the security of a competitive fixed rate home loan for 2 years with IMB. Get up to $4,000 cashback (T&Cs apply). Up to 12 months repayments in advance without penalties. Free Internet and Mobile Banking redraws (T&Cs apply). Up to a 30 year loan term. Split loan available. No offset account.

  • Fixed Rate

    • Owner Occupier
    • Principal & Interest
    • <80% LVR
    Interest rate
    5.74 % p.a.
    Fixed 3 years
    Comparison rate
    6.81 % p.a.
    Initial monthly repayment
    $2,915

    Enjoy up to $3000 cashback for eligible first home buyers and $2000 cashback for refinancers on eligible home loans with the ANZ Fixed Rate Home Loan. Get the security of repayment certainty with a competitive locked in rate. No ongoing fees to pay. Offset account on 1-year fixed loans ($10/month fee applies). Interest-only payments allowed.

  • Unloan Variable

    • Owner Occupier
    • LVR <80%
    Interest rate
    5.99 % p.a.
    Variable
    Comparison rate
    5.90 % p.a.
    Initial monthly repayment
    $2,995
    Go to site

    Built by CommBank, the Unloan is the first home loan with an increasing discount (conditions apply) for borrowers. No application or banking fees. No monthly account keeping or early exit fees. Apply online in minutes.

  • Budget Home Loan

    • LVR <80%
    • Owner Occupier
    • Principal & Interest
    Interest rate
    6.04 % p.a.
    Variable
    Comparison rate
    6.07 % p.a.
    Initial monthly repayment
    $3,011
    Go to site

    Enjoy a discounted variable home loan from IMB. Get up to $4,000 cashback (T&Cs apply). Life-of-loan discount off IMB’s standard variable interest rate. Unrestricted additional repayments. Free Internet and Mobile Banking redraws (T&Cs apply). No monthly fees to pay. Up to a 30 year loan term. Split loan available. No offset account.

  • Mortgage Simplifier

    • LVR<80%
    • Owner Occupier
    • Principal & Interest
    Interest rate
    6.14 % p.a.
    Variable
    Comparison rate
    6.17 % p.a.
    Initial monthly repayment
    $3,043

    Get a competitive variable rate with ING’s Mortgage Simplifier. Free extra repayments, no monthly or annual fees. Freedom to make free extra repayments or redraws.

  • Elevate

    • Owner Occupier
    • Principal & Interest
    • <80% LVR
    Interest rate
    6.18 % p.a.
    Variable
    Comparison rate
    6.18 % p.a.
    Initial monthly repayment
    $3,056

    Get competitive rates on loan terms of 5 to 30 years with the Aussie Elevate Home Loan. Structure your loan with up to five splits. Make additional repayments (T&Cs apply). Offset accounts available. Unlimited redraw using your online banking account. Choose from weekly, fortnightly or monthly payments For loan amounts from $10,000 to $5 million.

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* 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. You can change the loan amount and term in the input boxes at the top of this table. 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.

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