Linking strategy

How to get a ‘1’ in front of your mortgage interest rate

Most of them are only for one year term and from small lenders.

The lowest fixed rate loan in the RateCity database – which covers 124 lenders and around 6,500 home loan products – was a tie between Pacific Mortgage Group and Qudos Bank, offering a rate of 1.89% for one year. Then, G & C Mutual Group offered 1 year fixed at 1.98%.

Then there was a product group of small lenders at 1.99%, including online-only lenders 86,400 (owned by NAB) and Well Home Loans, and smaller banks Greater Bank (NSW, ACT and QLD only ), Police Bank, Geelong Bank (for LTVs below 60 percent), Unity Bank, RACQ Bank and Bank of Heritage Isle (based in Tasmania). The Southern Cross Credit Union is also still offering 1.99% for a fixed two-year term.

Normally I don’t like naming names like this. And none of this is a recommendation to readers.

However, I think it’s an important reminder that there are a range of players in the mortgage market. It’s often the little guys who are the most eager to brand your business.

I know a lot of people are reluctant to move to smaller lenders, but consider this: it’s not like you trust them with your money, like when you choose a bank to deposit funds with. Then you really want to be covered by the government deposit guarantee.

However, when you take out a loan, the lender has more of an incentive to make sure you can repay the money to them, rather than worrying about them going bankrupt.

So if you’re ready to act fast and look past the big four banks, there are still below “2” fixed interest rates available. The same goes for variable rate mortgages.

As the war on ultra-low fixed rates has died down, competition for variable rate loans is heating up. The RateCity database reveals about 60 variable rate loan products with a “1” in front.

The lowest variable rate product is from online lender Reduce Home Loans, which offers 1.77% to borrowers with a Loan to Valuation (LVR) ratio below 80%.

Both Homestar Finance and Pacific Mortgage Group offer 1.79% to borrowers with an LVR below 60%. Well Home Loans offers 1.82% on its “Equity Plus” variable rate loan and Freedom Loans 1.84% for LVR borrowers below 60%.

Seven lenders offer a variable rate of 1.89% (with different LVR criteria), including Athena Home Loans, 86400, Homestar Finance, Reduce Home Loans, Tic:toc (which also offers $2022 cash back), Police Credit Union and

In the larger end of town, SunCorp Bank, HSBC, ME Bank, Adelaide Bank, Aussie, ING and Bendigo Bank also offer floating rates below 2%.

Of course, variable rates expose you to future interest rate hikes and the extent to which lenders choose to pass them on.

If you plan to fix your mortgage interest rate for a while, remember that there is usually no – or only little – room to make additional repayments, if you run into any cash unexpected.

In a world where fixed rates are rising steadily, it may also be important to consider paying a “rate lock” fee – which can cost up to $1,000 – to ensure you get the interest rate. advertised if you are applying for a new loan, rather than the going rate when it is finally approved.

Also consider any reduced possibility of having a mortgage offset account on fixed rate loans and the impact of ‘prepayment’ charges if you were to cancel the loan early.


You can also choose to fix part of your loan and keep the rest at a variable rate.

Finally, always ask for a repayment offer from a new lender to cover the cost of switching from your current lender.

I still can’t tell you if you need to repair. But I can tell you that if you want to settle for less than 2%, you better act quickly.

Happy Mortgage Shopping!

  • The advice given in this article is of a general nature and is not intended to influence readers’ decisions regarding investments or financial products. They should always seek professional advice that takes their personal circumstances into account before making financial decisions.

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