Home New loan New lowest mortgage rate of 1.58%, but there’s a catch

New lowest mortgage rate of 1.58%, but there’s a catch

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There’s a new, very low introductory rate in the home mortgage market, and it’s a timely reminder for homeowners to look at the fine print and compare their options.

The record 1.58% variable mortgage rate comes from Orange Credit Union and is available for a two-year introductory period. After that it comes down to a rate of 2.89%.

The 2-year introductory variable rate home loan is available for new loans only, and potential buyers can get mortgage approval with as little as 5% down.

While this interest rate is competitive, it’s important to know that introductory offers are designed to attract new customers. This can usually work in the borrower’s favor, especially when combined with other offers, like a repayment offer, but they will revert to a new interest rate at the end of this period.

Typically, the repayment rate for a home loan is higher than the introductory offer, so you need to make sure that at the end of the introductory period you can afford the new higher interest rate. raised.

Since variable rates for home loans are subject to market fluctuations, it should be borne in mind that the rate of return may be higher than expected if the cash rate were to increase over the next two years. that some experts have suggested doing.

A competitive season for variable rate loans

This competitive introductory rate comes in the midst of a roller coaster year for mortgage interest rates. Although the Reserve Bank of Australia has kept the policy rate at 0.10% since November last year, interest rates have been anything but flat.

In 2021 alone, 107 lenders cut at least one variable interest rate, with most of the cuts being reserved for base variable rates and new customers. As a result, the number of variable rates below 2% increased last year, from 15 at the start of the year to 65. For prospective borrowers, the variable rate mortgage market is becoming more and more competitive. .

Meanwhile, fixed interest rates have steadily increased, with the Big Four banks raising fixed rates three to four times in the past two months alone. Borrowers looking to get a fixed rate below 2% may now need to consider lenders outside of the big four.

For homeowners considering refinancing in 2022, and for first-time home buyers, it’s a timely reminder to shop around before signing on the dotted line.

With a range of competitive home loans available in the market at less than 2% for both variable and fixed rate options, it may be worth researching your best home loan option. Comparison tools, such as tables and calculators, can be useful for allowing borrowers to filter and create a shortlist of tailored home loan options.

Keep in mind that a home loan is not limited to the interest rate offered. It is worth comparing the fees, as well as the features and flexibility offered by the lender.

To help you get started with your home loan comparison, here are the lowest interest rates from the RateCity database, including the lowest open variable rate.

Source: RateCity.com.au. Note: Based on homeowner interest rates paying principal and interest, excludes introductory and low-doc mortgage rates. Data correct as of 12/15/21.


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