Best Home Loan Rates in Australia

The lowest home loan rates in Australia are generally offered by smaller lenders looking to boost market share. You generally won’t find the best rates just by shopping around the major banks and other large high-street lenders.

These smaller lenders offering the best rates will typically either be member-owned banks (e.g. Australian Mutual Bank, Horizon Bank, Border Bank) or non-bank lenders (e.g. Pacific Mortgage Group, Loans.com.au, Athena).

The reality is having a home loan with a smaller lender offering sharp rates won’t be all that different versus being with a major lender. It can pay to consider these less-well-known lenders.

That said, some borrowers do prefer the familiarity of the bigger-name brands, like the big 4 banks (ANZ, Commbank, NAB and Westpac). Larger lenders also invest heavily in online tools and processes which smaller lenders can’t always match.

The question to ask yourself is: are you willing to forego the slick branding and operation of a large lender if choosing a lesser-known provider means you can secure the best home loan rate? A mortgage broker can help you weigh up the trade-offs if you're not sure.

Below we round up the best home loan rates available on a range of different loan types to suit a range of borrowers and situations.

Finding the best home loan rate will mean different things to different borrowers, but if we think of ‘best’ as being the lowest interest rate available, these are the types of borrowers that typically get them:

Owner occupiers: If you’re borrowing to purchase a property to live in, you generally qualify for lower home loan rates, versus investment property loan rates. There’s often a 0.25% discount for owner occupiers on the exact same loan for owner occupiers.

Borrowers with a high level of equity: It’s very common for lenders to have ‘tiered’ interest rates on their home loans based on the borrower’s LVR, with the best rates on offer to borrowers who have a large deposit or equity in their property.

Borrowers with a good or excellent credit score: Lenders don’t always tier their home loan rates based on credit score, but the reality is bad credit mortgage rates are generally worse. This is simply because a low credit score means you won’t qualify with a lot of mainstream lenders, which will limit your ability to access the best home loan rates.

Flexible borrowers: Borrowers who are willing to shop around and consider a variety of lenders can generally find lower rates. It can also help if you’re open to a fixed or variable rate as these trade places in terms of which offers the lowest rates.

Regular refinancers: Staying with the same lender over a long period without refinancing is rarely a recipe for getting the best interest rate in your home loan. You should consider checking refinance rates every couple of years to ensure your loan is still competitive in the market.

Borrowers who keep it simple: A good rule of thumb is that the more straightforward the loan, then lower the rate will be. Adding features (or risk) adds cost for the lender, so they price their low-frill loans to make them more attractive. If you want an offset account, package loan, or an interest-only home loan rate, expect to pay more.

Here are some other scenarios where what appears to be the best home loan rate could end up costing you more in the long run:

• The super low interest rate being advertised by the lender is an introductory offer, with a higher rate kicking in after a year.

• You have a decent chunk of cash savings, but the low rate loans you’re looking at don’t come with an offset account which would help you save on interest.

• The loan has a variable rate, but rates are likely to increase in the near future.

• The loan has a low fixed rate relative to variable, but rates are likely to fall in the near future which could push variable rates lower.

Variable rate

The interest rate on a variable home loan can be increased or lowered by the lender at any time, generally when the Reserve Bank of Australia makes a change to the official cash rate. It means you have less certainty over your repayments over time, but there is the potential to lower your costs if interest rates go down. These loans generally offer more flexibility to make extra repayments and more loan features, like an offset account.

Fixed rate

If you go with a fixed rate loan, the interest rate is locked in for a set period of between one and five years. During the period your repayments will be at the same level. You’ll be protected from interest rate increases, but you won’t benefit if rates go down. These loans generally offer less scope to pay off extra and come with minimal extra features. There are break costs if you want to end the fixed term early.

Split rate

As the name suggests, a split loan offers a split between a fixed and variable rate. You effectively have two loans, one at a variable rate and the other at a fixed rate. It’s up to you how much of the loan goes on the variable rate and how much goes on the fixed rate. This may be the best option if you’re genuinely unsure whether to go variable or lock in your loan at a fixed rate.