October home loan snapshot: ING and CBA cut rates, lenders launch LMI waivers

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Spring has sprung which means the property market has started to heat up, but so too has the home loan market, with lenders making a series of cuts in recent weeks and more likely to come in the month ahead.

So what is the current state of home loan rates in October and what are the rising trends we’ve been witnessing in the market?

Variable rates: ING and CBA trim offers

According to the latest edition of the Mozo Banking Roundup, the steady flow of variable rate cuts has continued over the past month, meaning the average variable home loan rate in the Mozo database has reduced from 3.36% to 3.33%.

ING was perhaps the most notable lender to sharpen rates for owner occupiers in recent weeks, taking 10 basis points off two of its popular offers.

The changes leave the lowest rates available on ING’s Mortgage Simplifier at 2.45% (2.48% comparison rate*) and 2.50% (2.85% comparison rate*) on its Orange Advantage (Package) loan. Among the other notable changes:

  • The Commonwealth Bank cut its Extra Home Loan rate to 2.69% (2.70% comparison rate*) - the lowest available among the big four
  • People’s Choice Credit Union dropped the rate on its Basic Variable Home Loan to 2.49% (2.49% comparison rate*)
  • Online lender Athena cut rates on its AcceleRATES Variable Home Loan to as low as 2.34% (2.34% comparison rate*) for borrowers with lower loan-to-value ratios

To put these all these recent changes into perspective, here are the five lowest basic variable home loan rates^ in the Mozo database as of October 1, 2020:

Variable rateLenderLoan
2.17% (2.20% comparison rate*)Well Home LoansWell Balanced
2.19% (2.19% comparison rate*)Reduce Home LoansSuper Saver Variable
2.19% (2.59% comparison rate*)firstmacBasic 80 (Broker Special)
2.29% (2.32% comparison rate*)HomestarStar Essentials Home Loan
2.34% (2.34% comparison rate*)Pacific Mortgage GroupStandard Variable Loan

Fixed rates: Short term cuts continue

In more good news for borrowers fixed rate cuts certainly haven't let up, as the Mozo Banking Roundup reported on a number of changes which have occurred in recent weeks. As a result, fixed home loan interest rate averages have fallen across the board.

Lenders appear to be continuing to target shorter term fixed loans, with the most notable changes in recent weeks all being made to 2-year and 3-year fixed home loan rates:

  • AMP reduced the 2-year rate on its Fixed Rate Loan (Professional Package) to 2.19% (3.13% comparison rate*)
  • Online lender Tic:Toc cut its 2-year Fixed Home Loan rate to 2.09% (2.35% comparison rate*)
  • Illawarra Credit Union introduced a new 2-year fixed rate of just 1.99% (2.93% comparison rate*) with on its The Works Fixed Home Loan Special Offer (Package)
  • Homestar launched a new 3-year fixed rate of just 2.06% (2.38% comparison rate*) on its Star Classic Fixed Home Loan

Here’s how these changes stack up against the lowest fixed rates in the Mozo database (as well as our fixed home loan averages) as of October 1, 2020:

TermRate leaderFixed rateAverage
1-yearReduce Home Loans1.90% (2.43% comparison rate*)2.55%
2-yearCommunity First Credit Union1.99% (3.25% comparison rate*)2.50%
3-yearBank First1.99% (3.11% comparison rate*)2.57%
4-yearHSBC2.50% (2.95% comparison rate*)2.91%
5-yearVirgin Money2.49% (2.87% comparison rate*)2.94%

Lenders Mortgage Insurance reductions

Aside from changes to interest rates, another trend which has popped up in recent weeks - and one that might see more of given the competitiveness of the market - is the waiving or reduction of Lenders Mortgage Insurance (LMI) from some lenders. 

Lenders generally require borrowers to take out LMI on loans with a loan-to-value ratio (LVR) above 80%, meaning it’s particularly common among first-time buyers. 

However, in recent weeks a number of lenders including ME Bank, St. George and Virgin Money have either come out with offers to reduce the cost of LMI, or waive the cost altogether for borrowers applying for particular loans. 

Depending on the size of the loan and the loan-to-value ratio involved, these LMI reductions could potentially end up saving borrowers thousands of dollars. 

RELATED: ME Bank and Virgin Money slash Lenders Mortgage Insurance

Looking to enter the property market this spring, or refinance your existing loan? Cast your eyes over the hot rates in the table below, or head on over to the Mozo home loan comparison tables for the latest rates from even more lenders. 

^Based on an owner occupier making principal and interest repayments on a $400,000 loan with an 80% LVR.

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  • placeholder
    Mozo Experts Choice 2021
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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, 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.

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