Teachers Mutual Bank cuts first-year home loan rates to new lows

Just when you thought home loan rates wouldn’t drop any further after three RBA cuts this year, Teachers Mutual Bank rises to the challenge. The mutual bank is launching a special 1-year introductory rate of 2.80% (3.29% comparison rate*) for its Classic Home Loan.

Starting from 1 November, the rate is available for a limited time to owner-occupiers with at least a 20% deposit, borrowing a loan amount of $250,000 up to $1,000,000 from any Teachers Mutual Bank Limited brand: Firefighters Mutual Bank, Health Professionals Bank, Teachers Mutual Bank or UniBank. 

According to Teachers Mutual Bank Limited’s Head of Third Party Distribution, Mark Middleton, the new rate offers the best of two worlds - the certainty of fixed repayments for one year, along with access to a range of flexible features including free extra repayments and a redraw facility. 

“We’re excited about this new rate which we think will suit the needs of many of our current members as well as new customers,” he said. 

“We’ve heard from both members and brokers that people are looking for a guaranteed low rate for a fixed period, but to have the flexibility of a variable product. This gives them the comfort of knowing their repayments won’t be going up for that period, but also gives them options like making additional repayments and redrawing without financial penalty.” 

RELATED ARTICLE: Why Aussies are choosing customer-owned banks over the big four

How good is Teachers Mutual Bank’s special rate? 

Teachers Mutual Bank’s introductory rate of 2.80% (3.29% comparison rate*) is ultra-low, being almost 90 basis points below the average variable home loan rate of 3.68%**. But keep in mind it only lasts for a 1-year fixed term before reverting back to the Classic Home Loan rate of 3.29% (3.34% comparison rate*). 

This special offer doesn’t quite beat the lowest rate in Mozo’s database either*** Reduce Home Loan's Low Rider Loan comes with a more competitive rate of 2.69% (2.71% comparison rate*) for five years and an even better loyalty discount rate of 2.59% (2.71% comparison rate*) after that.

Let’s take a look at what this means in terms of interest costs^: 

  • If you took out a $400,000 home loan over 30 years with Teachers Mutual Bank, you would make initial monthly repayments of $1,644 then $1,747 after the first year, and pay $227,537 in total interest.
  • On the lowest variable rate, your monthly repayments would drop down to $1,620 for 5 years and $1,602 after that. Meanwhile your interest costs would fall to $177,909, which means you would save $49,628 in interest over the life of the loan.
  • But compared to the average rate, Teachers Mutual Bank is a great option: if you took out a home loan at the average rate, you would have to make considerably higher monthly repayments of $1,837 and pay $261,180 (or $33,643 more) in total interest.  

If Teachers Mutual’s special rate is your cup of tea, be sure to apply between 1 November 2019 and 29 February 2020, with unconditional approval received by 31 March 2020 and loan settled by 30 June 2020. 

Or if you’re interested in checking out other deals in the market, head over to our home loans comparison table to compare options today. 

**Average based on $400,000 home loan (principal and interest) at 80% loan-to-value ratio (LVR), as of 31 October 2019. 

***Reduce Home Loan's Low Rider has the lowest variable rate in Mozo's database, as of 31 October 2019.

^Calculations based on $400,000 home loan over 30 years, as of 1 November 2019.