Lowest home loan interest rates in July 2024
If you’re on the hunt for an ultra-cheap deal, these are the best (lowest) home loan interest rates available right now:
- Lowest variable home loan rate: 5.69% p.a., comparison rate 6.15% (max 95% LVR). Laboratories Credit Union (LCU).
- Lowest 1-year fixed rate: 5.85% p.a., comparison rate 7.63% p.a. (max 60% LVR). Arab Bank Australia.
- Lowest 2-year fixed rate: 5.53% p.a., comparison rate 6.30% p.a. (max 80% LVR). Australian Mutual Bank.
- Lowest 3-year fixed rate: 5.48% p.a., comparison rate 6.24% p.a. (max 80% LVR). Australian Mutual Bank.
- Lowest 4-year fixed rate: 5.79% p.a., comparison rate 6.38% p.a. (max 80% LVR). People's Choice.
- Lowest 5-year fixed rate: 5.59% p.a., comparison rate 6.25% p.a. (max 60% LVR). RACQ Bank.
Source: Money’s database. Rates based on owner-occupier loans (with P&I repayments).
Latest home loan & interest rate news
- Borrowers will find out whether their loan repayments could be going up yet again when the Reserve Bank of Australia (RBA) Board next meets on 6 August. Some economists predict a possible rate rise following an increase in Australia's annual inflation rate. This is in contrast to the big four banks initially forecasting potential rate cuts later in 2024 or 2025.
- The total value of new home loans rose 4.8% month-on-month, according to the Australian Bureau of Statistics (ABS) latest lending indicators (April 2024). This reflects a rise in the average loan size, mirroring the growth in Australia’s house prices. New mortgage values are up 24.6% year-on-year.
- Some lenders are ending introductory rate deals and cashback offers as we enter the 2024-2025 financial year. Things generally hot up again as we approach spring and the busy home buying and selling period.
Updated 3 July 2024
When will interest rates change?
Peter Drennan, Money's Research & Data Expert
"The RBA wants inflation back between 2-3%, and we're on the way. While that is the case, there is little need to raise rates. But, with inflation still at 3.6%, rate reductions are not likely to happen in the short term either, unless the economy needs a boost . Economists, including those from the big banks, expect the cash rate to fall towards the end of 2024 and into 2025, which would naturally lead to lower mortgage rates. Lower inflation will also reduce living expenses, improving borrowing capacity, so conditions for home loans are likely to improve in the medium term."
Peter Drennan, Money's Research & Data Expert
How much could you save with a lower rate on your home loan?
Depending on your loan amount, interest rate, and term — you could end up paying 50-100% of your total mortgage amount in interest over time. Getting even a slightly lower rate on your home loan could save you thousands of dollars over the life of the loan.
Here’s an example of how much you could save on a $600,000 home loan (roughly the average home loan amount in Australia) with a 5.50% interest rate instead of 6.00% over a 30-year term, with principal and interest repayments. Neither home loan has an introductory rate or fees.
| Interest rate | 5.50% p.a. | 6.00% p.a. |
|---|---|---|
Loan amount | $600,000 | $600,000 |
Loan term | 30 years | 30 years |
Monthly repayments | $3,407 | $3,597 |
Interest over the life of the loan | $626,424 | $695,029 |
Difference over the life of the loan | Save $68,605 |
How to structure your home loan to save on interest
In addition to shopping for the lowest interest rate, here are some simple tips from Money’s home loans expert and mortgage broker, Mansour Soltani, to help you shave time and money off your mortgage.
1
Switch to fortnightly repayments
By making fortnightly repayments instead of monthly, you'll make the equivalent of an extra month's repayment each year without even realising it. There are 26 fortnights a year, the equivalent of 13 monthly repayments. This helps reduce your loan balance sooner and your total interest paid over the life of the loan.
2
Increase your repayments by 5-10%
If your budget allows, consider making extra home loan repayments (however small). For instance, increasing your fortnightly repayments on a $600,000 loan at 6.00% interest over 30 years by just 5% (adding $115 each fortnight) could save you $100,310 in interest overall and shave three years off your home loan.
3
Use your offset account
Keep your household income and savings in your offset account to reduce your interest payable. For a $600,000 home loan with a 6.00% interest rate and fortnightly repayments, having $20,000 in your offset account could shave two years off the loan's life and save $91,742 in interest.
4
Refinance every 2-3 years
Consider refinancing to a lower interest rate every 2-3 years if the market allows, while also reducing your loan term by one year each time. For instance, refinancing a $600,000 home loan from a 6.00% rate on a 25-year term to a slightly lower rate of 5.80% on a 24-year term would slightly reduce your monthly repayments and save you $47,017 in interest over the life of the loan.
Bonus tip...
Mansour Soltani, Money's Home Loans Expert
“To get the best home loan interest rate, your LVR should be 60% or less. Every borrower should aim to lower their LVR to 60% as soon as possible. You can do this by paying down your mortgage when you can or by building the equity in your home by increasing its value.”
Mansour Soltani, Money's Home Loans Expert
Fixed vs variable interest rate home loans compared
Your home loan interest rate will either be fixed, variable or split (a combination of the two). Here’s how they work.
Fixed versus variable interest rate
Variable rate home loan
The interest rate can fluctuate throughout the life of the loan. You can benefit from lower repayments when interest rates drop and you usually have more flexibility to make extra repayments on your loan to pay it off faster. The downside of a variable rate home loan is the unpredictability — if rates go up, so will your repayments. The majority of owner-occupier loans in Australia have a variable interest rate, according to the RBA.
Fixed rate home loan
The interest rate on the loan is fixed for a period of time — typically between one and five years. This gives you certainty over your repayments during the fixed rate period and protection from sudden rate increases. The main downside of a fixed rate home loan is that you may not be able to make extra repayments or have access to extra features like redraw.
How does a split home loan work?
A portion of your home loan is fixed and the remainder is on a variable interest rate. This can give you the best of both worlds, the certainty of fixed rate repayments and the flexibility of a variable loan. You can choose the portions of your split, whether it's 50/50, 60/40, or 70/30.
Principal & interest vs interest-only home loan repayments
Your home loan is made up of two parts: the loan principal (what you borrow) and the interest (not including fees). So, when you apply for a home, you'll generally have two repayment options:
Principal and interest repayments (P&I)
You pay both the principal of your home loan and the interest. Your regular repayments will be higher, but you will pay less interest overall over the life of the loan. This is the most common type of loan repayment structure for owner-occupiers.
Interest-only repayments
You only pay the interest component of your loan for a set period (up to five years). This lowers your mortgage repayments during that period, but it means you'll pay more interest over the life of the loan. Interest-only loans are popular among investors because it can free up cash flow, with the extra costs being less of an issue as interest repayments may be tax deductible.
How does your LVR affect your home loan?
One of the biggest factors that will impact your home loan interest rate is your loan-to-value ratio (LVR). This is your loan amount relative to the property's value.
For example, if your loan amount is $600,000 and the property you’re buying is worth $750,000 (i.e. your home loan deposit is $150,000), your LVR is 80%. In other words, you’re borrowing 80% of the property’s value.
The lower your LVR, generally the lower your rate and vice versa (see this example below from Ubank).
If your LVR exceeds 80% (you have less than a 20% deposit), you may need to pay for lender’s mortgage insurance (LMI).
Types of home loans explained
Owner-occupier home loan
This is a standard home loan to buy a property you want to live in. Owner-occupier home loans generally have lower interest rates, than investor loans. Owner-occupier home loans are the most common type of home loan in Australia, according to the ABS.
Refinance home loan
A refinance home loan is a new loan you can take out to pay out your current mortgage. This often involves switching to a different lender (typically for a better rate). Still, you can refinance with your current lender by switching to a different loan product with better terms. Refinancing comes with fees, so make sure you know the cost and can weigh it against the benefits before deciding.
Low deposit home loan
Commonly used by first-home buyers, a low deposit home loan allows you to buy a home with a 5-10% deposit, instead of the standard 20% of the property’s value most lenders require. This means you may have to pay LMI, unless you apply through a government scheme or with a guarantor.
Low doc home loan
A low doc home loan requires minimal documentation when you apply. It’s most commonly used by business owners or self-employed individuals who can’t provide the standard documents most lenders ask for, like payslips.
Construction loan
Designed for borrowers who plan to build a home or investment property. A construction home loan functions a little differently than a regular home loan, allowing you to withdraw funds in stages as needed to complete the construction. This type of loan is often combined with a land loan to purchase vacant land or a house and land package.
Bad credit home loan
A bad credit home loan allows borrowers with a bad credit score/credit history or those who’ve declared bankruptcy to secure a home loan and purchase property.
Investment home loan
You can take out this home loan to buy an investment property (one from which you can get rental income). Investment home loans generally have higher interest rates because investors are considered riskier borrowers compared to owner-occupiers.
Home equity loan
A home equity loan allows you to borrow against the equity in your home. You can do this by increasing your existing home loan balance (known as a top-up) or with a cash-out refinance (where your equity is paid as a lump sum). Another option is a home equity line of credit, which lets you borrow against your home's equity when you need it.
Guarantor home loan
A guarantor home loan works much like a standard home loan, but includes a guarantor (typically a parent or family member) with home equity to secure part of your loan. It can also be known as a no-deposit home loan.
Bridging loan
A bridging loan is a short-term loan designed to cover the financing gap between purchasing a new property and selling an existing one. You can also use a bridging loan to fund a new construction while you live in your existing property.
Second mortgage
A second mortgage lets you to borrow against your home equity to take out an additional mortgage on your property. This option is often used when serving as a guarantor for a family member or as an alternative to refinancing.
SMSF loan
This is a home loan used by a self-managed super fund (SMSF) to purchase an investment property. It's similar to a trust loan used by family trusts and other trust entities.
What home loan features can you access?
Home loans come with features that can help you save on interest and manage your mortgage more effectively.
Offset account
A 100% offset account is a transaction account linked to your home loan that reduces your interest payable. Every dollar in that account offsets what you owe on your mortgage and your interest. Think of it like a high interest savings account, only instead of earning interest, you're avoiding it.
Extra repayments
Many home loans offer the option to make additional repayments on top of your minimum mortgage repayments. This allows you to pay down your principal loan faster and save on interest. Fixed-rate loans often have limits on additional repayments of up to $10,000 or $20,000 per year.
Redraw facility
Allows you to withdraw any extra repayments you've made on your home loan. You can use your redraw facility for any reason, including emergencies, investments, or other expenses. You can find more in our guide comparing a redraw and offset account.
Repayment holiday
This allows you to temporarily pause or reduce your regular loan repayments, but it could increase your future repayments as accrued interest will be added (capitalised) to your home loan balance. This feature can be handy during parental leave or if you anticipate a temporary reduction in income.
Portability
This option allows you to transfer your home loan to another property without incurring fees. This saves you the hassle of refinancing if you move home and allows you to keep your fixed rate without break costs.
Cashback offers
Some lenders offer cashback deals to attract new customers and incentivise borrowers to refinance their home loans. Some lenders also offer cashbacks to first-home buyers.
Home loan fees to keep in mind
Application fee: This is an upfront fee to set up your home loan. It’s also known as a loan processing fee or establishment fee. Depending on the lender, it can range from $150 to $750.
Monthly/account-keeping fees: Monthly service fees cover the cost of maintaining your loan. Depending on the loan product, these can range from $8 to $10 (sometimes more).
Annual package fee: A yearly fee charged on a package home loan (which combines your mortgage with other financial products like a credit card). It can range from $300 - $500, depending on the loan product.
Legal, valuation and settlement fees: These fees cover the lender’s costs for legal paperwork, property valuation and settlement.
Exit fee: You might pay an exit fee (or a discharge fee) when you pay your mortgage in full. Early exit fees or break costs apply when you pay off your home loan early.
Fees for features: Some loans come with fees if you use certain features like your redraw facility or additional repayment option. Make sure to weigh up home loan fees against the benefits the feature provides.
Should you use a mortgage broker for your home loan comparison?
Mortgage brokers facilitate the majority of new residential home loans in Australia. A good mortgage broker takes the guesswork out of doing a home loan comparison and may even be able to get you a more competitive rate. Just bear in mind they usually only work with lenders on their panel and those they’re accredited with.
Make sure your mortgage broker gives you 3-5 lender options, and get them to explain why they chose these lenders specifically.
Mansour Soltani, Money's Home Loans Expert
“If you’re refinancing or purchasing a new home and your LVR is less than 70% (in other words you have a deposit or equity of at least 30%), you should be able to get better than the advertised price, especially if your loan amount is under $1 million. Usually, the lender will shave 10-15 basis points off the advertised rate and if they don't, ask why."
Mansour Soltani, Money's Home Loans Expert
How to apply for a home loan
The home loan application process is similar across lenders and typically looks like this:
1
Gather your supporting documents
Collect all necessary documents the lender may ask for, including proof of income (e.g. payslips, tax returns), identification documents (e.g. passport, driver's licence), bank statements and details of your assets and liabilities.
2
Complete a home loan application form
You’ll be asked to provide information about your finances, deposit or equity (if you’re refinancing) and the type of property you want to buy. A lending specialist may call you to discuss your application and the fine print.
3
Get conditional approval
You’ll generally be asked to submit all your supporting documents at this stage. Your lender will assess your financial position and confirm your borrowing capacity, after which you may receive conditional approval (pre-approval).
4
The lender will conduct a credit check
Your lender will check your credit report via an external bureau like Equifax or Experian. They will also review your credit history, income, expenses, and existing debts. Your lender should ask for permission before conducting a formal credit check.
5
The property will undergo a valuation
Your lender will arrange for a valuation of the property you want to buy to determine its market value and your LVR. This could involve either a physical inspection of the property by an independent valuer or a digital valuation using recent sales data from CoreLogic for the area. An LVR higher than 80% will generally mean you need to pay for lender’s mortgage insurance (LMI).
6
Get a loan offer
If your application is approved, your lender will issue you a formal loan offer detailing the terms and conditions of the loan, including your rate. Review the loan offer carefully with your conveyancer and sign it if you accept the terms.
7
Get ready for settlement
Your lender will finalise your loan through to settlement and disburse the funds to the seller. Your conveyancer should manage your home loan registration and property title transfer.
8
Review your home loan regularly
The work continues after your home loan settlement and home purchase. Generally, you should do a thorough home loan check every couple of years to ensure you’re still on a competitive rate and that your loan still meets your changing needs. If not, you can refinance your home loan.
