First home buyers with 40% deposits set to snag cheaper home loans
Since the Reserve Bank’s (RBA) decision last week to reduce official interest rates to yet another record low, attention has been on the home loans market to see which banks would follow suit.
While responses have been varied, with some focused on slashing variable rates and others on moving fixed rates, one thing is clear: even cheaper home loans are now on the table, especially for borrowers with loan-to-value ratios (LVRs) as low as 60%.
LVR refers to the portion of the property value that you owe your lender. So a 60% LVR means you’ve either saved a 40% deposit (if you’re a new customer) or built up 40% in home equity (if you already have a mortgage).
Over the past few months, there’s been an interesting trend of lenders serving up their best rate discounts to customers with LVRs of up to 60%. In light of the November RBA cut, these discounts have only gotten bigger.
Take Reduce Home loans, for instance, who shaved 12 basis points (bp) off its Rate Cutter Variable loan, available only to borrowers with LVRs of 60% or less. This loan was already one of the most competitive offers in the Mozo database, but now it’s fallen even further to just 1.77% (1.83% comparison rate*).
Which lenders have cut their 60% LVR rates?
So far after the latest RBA cut, six providers in the Mozo database have sharpened their offers for LVRs of up to 60%. Below we’ve outlined the key changes, including how much rates have dropped and where they now sit:
Athena - Celebrate Variable Home Loan (part of the AcceleRATES Variable Home Loan)
- Full 15 bp cut
- Variable rates from 2.19% (2.19% comparison rate)
Homeloans.com.au - Low Rate Home Loan
- Full 15 bp cut
- Variable rates from 2.14% (2.16% comparison rate*)
Homestar - Star Gold Home Loan
- Massive 50 bp cut
- Variable rates from 1.79% (1.84% comparison rate*)
MyState Bank - Basic Variable
- 20 bp cut
- Variable rates from 2.49% (2.52% comparison rate*)
Pacific Mortgage Group - Standard Variable Home Loan
- Partial 10 bp cut
- Variable rates from 1.89% (1.89% comparison rate*)
Reduce Home Loans - Rate Cutter Variable
- Partial 12 bp cut
- Variable rates from 1.77% (1.83% comparison rate*)
If I’m a first home buyer, can I afford a 60% LVR loan?
The short answer is yes - as long as you can save a 40% home deposit. But given that raising the standard 20% is already no easy feat, you may be wondering whether 40% is actually a realistic goal.
Well, that depends on the property location you pick. As the latest Domain House Price Report (for September 2020) reveals, property prices can vary drastically from city to city, which means so can the ‘strength’ of your 40% deposit.
For instance, while the median price of Sydney houses is above a million dollars ($1,154,406), in more regional suburbs like Cessnock or less populous capital cities like Perth, you’ll find houses being sold for less than half that price ($415,200 and $534,336 respectively).
Given those price differences, a 40% deposit could be as high as $461,762 (in Sydney) or a much lower $166,080 (in Cessnock).
For a fuller snapshot, our map below shows how much properties are currently worth in various suburbs and states. If you hover over each location, you’ll be able to view its median house price as well as what a 40% deposit would look like:
Bear in mind, some lenders may only offer their lower LVR home loans to refinancers. So double check the restrictions and make sure the offer you’re considering is also available to home buyers before applying.
What if I already have a home loan?
Typically, it would be easier to have a lower LVR as a mortgage holder than a first home buyer. That’s because your LVR naturally decreases as you pay down your home loan over time, so you won’t need to go through the hard work of saving up for a 40% deposit. Other factors like a home renovation or a rise in housing demand in your area can also boost your equity position and lower your LVR.
Having a low LVR is good news especially in the current climate, where a range of lenders are not only moving rates in line with the RBA, but also tiering their rates according to LVR. Refinancing right now means you can both benefit from the reduced rates and take advantage of those LVR tiers to snag an even better bargain.
Knowing your own LVR can also give you a significant upperhand when negotiating rates with your lender. So it’s worth doing a free property valuation offered by a big bank, then using that figure to work out your LVR (which is loan amount ÷ property value). A good rule-of-thumb is to then add 5% to your estimate (e.g. 60% LVR becomes 65%), as you’ll need to account for the fact that lenders may be more conservative in their final valuations.
What’s next?
Of course, low LVR customers aren’t the only ones being showered with rate cut love. Borrowers with LVRs of 80% or even 90-95% will likely also find that lower rate deals are now up for grabs.
Interested in seeing which other lenders have moved their rates? Our article can help you keep track of all the latest home loan changes. Or if you’re ready to shop around, check out some competitive offers below.
Compare home loans - rates updated daily
Smart Booster Home Loan
1 Year Discounted Variable Rate, Owner Occupier, Principal & Interest, <80% LVR
interest rate
comparison rate
Initial monthly repayment
1.99% p.a.variable for 12 months and then 2.48% p.a. variable2.47% p.a.Smart Booster Home Loan
A super low introductory rate home loan with no monthly or ongoing fees. Unlimited free redraws and unlimited additional repayments to help you build your equity and own your home sooner. Multiple loan splits available. (Rates revert after introductory period ends). 20% minimum deposit required. Winner of two Mozo Expert's Choice Award for 2021.
- interest rate
- 1.99% p.a.variable for 12 months and then 2.48% p.a. variable
- comparison rate
- 2.47% p.a.
- Upfront fees
- $520
- Ongoing fees
- $0.00
- Discharge Fee
- $0.00
- Extra repayments
- yes - free
- Redraw facility
- yes - free
- Offset account
- Optional - with 0.10% additional interest
- Maximum loan to value ratio
- 80.00%
- minimum borrowing amount
- $50,000
- maximum borrowing amount
- $1,000,000
- type of mortgage
- Variable
- Repayment types
- Principal & Interest
- Availability
- Owner Occupier
- Repayment options
- Weekly, Fortnightly, Monthly
- Special Offers
- -
Read our Mozo Review to learn more about the Smart Booster Home Loan
UHomeLoan
Owner Occupier, Principal & Interest
interest rate
comparison rate
Initial monthly repayment
1.75% p.a.
fixed 3 years2.22% p.a.UHomeLoan
$0 fees and easy application. Choose between weekly, fortnightly or monthly repayments. 3 year fixed rates are for new Owner Occupier Principal & Interest loans.
- interest rate
- 1.75% p.a.
fixed 3 years
- comparison rate
- 2.22% p.a.
- Upfront fees
- $0
- Ongoing fees
- $0.00
- Discharge Fee
- $0.00
- Extra repayments
- yes - free up to $20,000 p.a.
- Redraw facility
- no
- Offset account
- no
- Maximum loan to value ratio
- 80.00%
- minimum borrowing amount
- $100,000
- maximum borrowing amount
- $2,000,000
- type of mortgage
- Fixed
- Repayment types
- Principal & Interest
- Availability
- Owner Occupier
- Repayment options
- Weekly, Fortnightly, Monthly
- Special Offers
- $395 Establishment fee waived for fixed rate loans that settle by 30 September 2022. Receive 1.75% 3 year fixed rate when you apply by 29 April 2021 and settle within 90 days.
Read our Mozo Review to learn more about the UHomeLoan
Basic Home Loan
Fixed, Owner Occupier, Principal & Interest, LVR<70%
interest rate
comparison rate
Initial monthly repayment
2.09% p.a.
fixed 3 years2.43% p.a.Basic Home Loan
Get a flexible loan structure with up to six loan accounts with different rate types. Make free extra repayments. Enjoy free redraw facility. No upfront or ongoing fees. Option to earn Qantas points.
- interest rate
- 2.09% p.a.
fixed 3 years
- comparison rate
- 2.43% p.a.
- Upfront fees
- $0
- Ongoing fees
- $0.00
- Discharge Fee
- $400.00
- Extra repayments
- yes - free
- Redraw facility
- yes - free
- Offset account
- no
- Maximum loan to value ratio
- 70.00%
- minimum borrowing amount
- $150,000
- maximum borrowing amount
- $750,000
- type of mortgage
- Fixed
- Repayment types
- Principal & Interest
- Availability
- Owner Occupier
- Repayment options
- Monthly
- Special Offers
- -
Read our Mozo Review to learn more about the Basic Home Loan
Celebrate Variable Home Loan
<60% LVR, Owner Occupier, Principal & Interest
interest rate
comparison rate
Initial monthly repayment
2.19% p.a. variable2.19% p.a.Celebrate Variable Home Loan
Fast and efficient online application. Automatic discounts as loan is paid off. Free extra repayments and redraw facility. Zero fees to consider. Min 40% deposit required. Winner of three Mozo Expert's Choice Award for 2021.
- interest rate
- 2.19% p.a. variable
- comparison rate
- 2.19% p.a.
- Upfront fees
- $0
- Ongoing fees
- $0.00
- Discharge Fee
- $0.00
- Extra repayments
- yes - free
- Redraw facility
- yes - free
- Offset account
- no
- Maximum loan to value ratio
- 60.00%
- minimum borrowing amount
- $100,000
- maximum borrowing amount
- $2,000,000
- type of mortgage
- Variable
- Repayment types
- Principal & Interest
- Availability
- Owner Occupier
- Repayment options
- Weekly, Fortnightly, Monthly
- Special Offers
- -
Read our Mozo Review to learn more about the Celebrate Variable Home Loan
Fixed Home Loan
Owner Occupier, Principal & Interest
interest rate
comparison rate
Initial monthly repayment
1.89% p.a.
fixed 2 years2.15% p.a.Fixed Home Loan
Award-winning low rate home loan that could save you thousands. No application or ongoing fees, fee-free redraws, unlimited additional repayments and an optional offset account for $10/month. Minimum 10% deposit. Winner of Mozo’s Experts Choice Award for Online Home Lender of the Year 2021.^
- interest rate
- 1.89% p.a.
fixed 2 years
- comparison rate
- 2.15% p.a.
- Upfront fees
- $0
- Ongoing fees
- $0.00
- Discharge Fee
- $325.00
- Extra repayments
- yes - free, up to $20,000 p.a.
- Redraw facility
- yes - free
- Offset account
- Optional - $10 per month
- Maximum loan to value ratio
- 90.00%
- minimum borrowing amount
- $50,000
- maximum borrowing amount
- $2,000,000
- type of mortgage
- Fixed
- Repayment types
- Principal & Interest
- Availability
- Owner Occupier
- Repayment options
- Weekly, Fortnightly, Monthly
- Special Offers
- -
Read our Mozo Review to learn more about the Fixed Home Loan
^See information about the Mozo Experts Choice Home Loans 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.