Home loan price check: Rates have moved in 2020, has yours?

To say that it’s been a noteworthy year for Australian interest rates and, as a result, mortgage rates may be an understatement.

Two rate cuts from the Reserve Bank in March, in addition to the three passed down in 2019, has resulted in an historically low cash rate of 0.25%. Add in the fallout from COVID-19 and, well,  the short of it is that home loan rates have been in flux!

So we don’t blame you if you haven’t kept up. 

Our data experts have though and they’ve crunched the numbers and provided a longer term view of the market movements as part of the July 2020 Mozo Banking Roundup. So if you’re interested in an overview of how home rates have shifted - and whether your own mortgage rate has kept pace - read on. 

Home loan rates for owner-occupiers

• Biggest falls among fixed rates 

• Refinancers targeted with discounted rates for lower LVRs

• Lowest variable rate below 2.20%; fixed rates under 2.00%

As the latest Mozo Banking Roundup shows, home loan rates for owner-occupiers have dropped substantially since January - particularly at the lowest end of the market. 

This is true of both variable rates and fixed rates, but is most apparent in the 1-year fixed rate category. In January, the lowest 1-year fixed rate in the Mozo database was 2.74%, but in just six months that’s dropped by 76 basis points to 1.98%. 

The same is true for average^ rates. Since January, the average rate for borrowers making principal and interest repayments has dropped by: 28 basis points (variable rates), 67 basis points (1-year fixed rates) and 51 basis points (3-year fixed rates).

“Lenders have been quite concerned about taking on more risk than they need to in recent months,” said Mozo Banking Expert, Peter Marshall.

 “As a result owner-occupiers making principal and interest repayments - particularly those with an LVR below 80% - have become very appealing, and they've become the real target of competition among lenders.”

While rate decreases are a trend we’ve witnessed across the board, a more specific trend to  emerge in recent months has been discounting for borrowers with lower LVR’s (loan to value ratios).

 In the past, lenders have typically offered lower rates on loans with LVRs below 80%, but as Marshall explains, a trend of heavier discounting for even lower LVRs has taken place of late. 

“One of the things we’re aware of and that we’ve picked up recently is this trend towards discounts on loans which have an LVR of less than 60%-70%,” he said. 

“That’s mostly looking at attracting refinancers - people who have had a loan for a while and have already paid some of it. So the lenders are being super sharp for those kinds of borrowers.”

So, just how sharp are some of the rates out there for owner-occupiers? Here’s a snapshot of the lowest variable and fixed rates in the Mozo database, based on a $400,000 loan (P&I repayments) being paid off over 30 years. 

Fixed rate market leaders - 7 August, 2020

Lowest variable rates - 7 August, 2020

Home loan rates for investors

• Fixed rates cut hardest

• Lowest variable rates below 2.70%; fixed rates under 2.30%

It’s not only owner-occupier home loan rates that have fallen steadily in 2020 - we’ve witnessed the same trend with investment loan rates as well, and once again the most dramatic movements have been in the fixed category.

Since January, the average^ rate for investors making principal and interest repayments has decreased by: 27 basis points (variable rates), 66 basis points (1-year fixed rates) and 54 basis points (3-year fixed rates).

As Marshall notes, the downward rate trend has applied to all types of loans, but borrowers looking for the best deals really need to be thinking about fixing their loans.

“We’ve witnessed lenders apply cuts for all borrower and loan types, but investors in particular should really be checking out the fixed rates around at the moment because they can be significantly lower than variable rate offers,” he said.

“It’s not all that surprising because investor rates have had a bit of a premium built into them for a while and it looks like that premium is being reduced a little. But if you’re not shopping around at the moment you’re probably not on the best rate, no matter what kind of borrower you are.”

So with that said, what does the sharpest end of the market look like for investors? 

Here’s a snapshot of the lowest variable and fixed rates currently available for investors in the Mozo database, based on a $400,000 loan (P&I repayments) being paid off over 30 years. 

Investor fixed rate market leaders - 7 August, 2020

Lowest investor variable rates - 7 August, 2020

For more information about the latest home loan rate changes plus changes to credit cards, personal loans, savings accounts and term deposits, check out the July edition of the Mozo Banking Roundup. 

Or take a look forward by checking out our latest article on the property market trends to expect in the rest of 2020. 

^Just a note on the averages used in this article. For this particular exercise the averages used only consider the single best rate from each provider for each type of borrower, rather than all rates on offer. And all rates are based on a loan amount of $400,000 and an LVR of 80%. For the latest averages of all rates in the Mozo database, visit our home loan statistics page.