A property buyer shopping around for a $1 million home loan with a 20 per cent deposit can save more than $6800 in annual repayments by choosing between the cheapest and most expensive variable rate on offer, analysis of rates reveals.
Lenders might also include another 30-50 basis point temporary discount, fee reductions, cash incentives, or velocity points, which can be used for overseas trips, in a bid to seal a deal in a highly competitive market.
A $1 million owner-occupier borrower has nearly 680 fixed and more than 340 variable interest rates to choose from among the big four giants, co-operatives, building societies, online lenders and mutuals.
An investor seeking the same size loan has more than 630 fixed and nearly 240 variable loans on offer.
Commonwealth Bank, the nation’s biggest lender, has the highest standard variable rate for a popular package home loan, which typically offers a discount, credit card, free transaction accounts and/or insurance discounts in exchange for an annual fee.
CBA’s wealth package standard variable rate for a principal and interest loan of 4.52 per cent is more than 100 basis points higher than Easy Street Financial Services rate of 3.49 per cent, or about $569 extra in monthly payments, according to analysis by Canstar, which compares product rates and fees.
Other small lenders, such as Freedom Lend, a non-bank lender that provides on-line loans, and Arab Bank Australia, also offer rates of about 3.49 per cent, or 3.50 per cent respectively.
The new rate for Westpac’s premier advantage rocket repay special will be 4.48 per cent following last week’s announcement of a 14 basis points increase from September 9.
Adelaide Bank, a division of Bendigo and Adelaide Bank, the nation’s fifth largest bank, and Suncorp, the sixth largest, quickly followed by raising their range of investor and owner-occupied mortgage products by up to 40 basis points.
Filling lending gaps
Other lenders are expected to follow in response to rising wholesale and regulatory costs, according to analysts.
Smaller banks are flooding into the lending gaps being created as the bigger lenders raise rates, according to major mortgage brokers, such as Australian Finance Group.
Regulation-lite shadow banks are also seizing market share across first-time buyer loans, investment and refinancing markets, particularly among buyers wanting to fix their rates, according to the broker’s analysis of its network’s loan book.
The lenders are assisted by increasingly price-sensitive borrowers’ readiness to use mortgage comparison websites to compare the best rates on offer.
The smaller lenders are also offering the best fixed rates over two- and three-year terms for a $1 million borrower.
For example, lowest two-year fixed rates range from Tic:Toc Home Loans’ two-year, owner-occupier headline offering of 3.64 per cent through to Newcastle Permanent’s rate of 3.69 per cent. Other lenders offering two-year rates below 4 per cent include Reduce Home Loans, BankVic and Greater Bank.
Lowest three-year rates range from East Street Financial Services headline rate of 3.69 per cent and Newcastle Permanent’s 3.74 per cent.
Other lenders offering below 4 per cent rates include Community First Credit Union and UBank, which is a division of National Australia Bank.