UBank bucks mortgage trend with 3.59% variable rate offer

Hikes, hikes, hikes. Many Aussie homeowners will have heard little else since the start of winter, but online lender UBank has well and truly broken ranks with many other lenders following today’s announcement of a cut to its UHomeLoan offer.

Starting from today, UBank is offering a reduced 3.59% variable interest rate (3.59% comparison rate*) on its UHomeLoan offer for owner occupiers wanting to borrow over $200,000 - a 10 basis points cut from the previous rate of 3.69%.

The move from UBank comes amid a flurry of rate hikes from a number of home loan lenders, with figures from the Mozo database revealing that nine different providers have increased, or announced future increases, to home loan rates across the board since June 1.   

Of those nine providers, AMP recorded the largest increases, with hikes of up to 17 basis points across a number of its owner occupier and investor loans.

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And according to Mozo Product Data Manager, Peter Marshall, mortgage holders are likely to see even more rate increases in the near future as banks look to mitigate increased funding pressure from abroad.

“While we’ve already seen a number of lenders make a move by lifting rates, the major banks have yet to join in. It’s only a matter of time before they do though, because they’re not immune to the increased funding costs which they’ve been absorbing for a while now.” 

How much could a lower home loan rate save you?

Given the threat of future home loan rate rises, many borrowers may be nervously reviewing their household budgets to see how much they need to brace themselves.

But for borrowers looking to reduce their mortgage costs - either by refinancing or grabbing a better deal to start with - is shopping around for a low rate home loan offer worth the effort?    

Take an example where Nathan and Mitch are looking to take out a $300,000 home loan in order to buy their first home. Data from the Mozo database shows that the average ongoing variable interest rate for a loan of this size, over a 30 year period, is 4.35%.

According to the Mozo home loan comparison calculator, that means the couple would end up paying a total of $237,637 in interest over the life of the loan.

Now compare that to a low rate offer like UBank’s UHomeLoan, which has a 3.59% interest rate (3.59% comparison rate*). Using the same scenario, Nathan and Mitch would end up paying a total of $190,410 in interest over a 30 year period - a $47,227 difference. 

RELATED: AMP joins latest round of home loan rate rises

Want to find out if there’s a better value home loan deal with your name on it? With Mozo’s handy comparison calculator you’ll be able to compare 500 different home loan offers from 80 home loan lenders to find a deal that's right for you. 

*The Comparison Rate combines the lender's interest rate, fees and charges into a single rate to show the true cost of a home loan. The comparison rate displayed is for a secured loan with monthly principal and interest repayments for $150,000 over 25 years, and applies only to this example. Different amounts and terms will result in different comparison rates. Full comparison rate schedules are available from lenders. Costs such as redraw fees or early repayment fees, and savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan.