The Reserve Bank has finally decided to tighten monetary policy, opting for a 25 basis point increase to the cash rate which leaves it sitting at 0.35%.
Variable rates, which had been steadily falling over the past year, are set to shoot back up. Within a day of the RBA’s announcement, all four major banks had increased their variable rates by 0.25%, and the rest of the market is expected to follow suit.
Official interest rates are predicted to continue rising throughout the year as the RBA focuses its attention on taming inflation. For borrowers who have not fixed their loans, this will mean that some budgeting will be in order to deal with higher repayments.
The expectation that the cash rate would go up was already baked into fixed rates, but we continue to see lenders making changes. In the last month alone, 71 of the 90 lenders in the Mozo database increased their fixed rates.
At the time of writing, the average rates for a $400,000 loan (OO, P&I, LVR >80%) among lenders we track are:
Peter has been working in the Australian banking and finance industry for over 20 years and oversees Mozo’s extensive product database. He is regularly sought out for his expert commentary and analysis on banking and interest rates trends by print, radio and TV media.
Latest home loan interest rates on Mozo
- last updated 21 May 2022
Search promoted home loans below or do a full Mozo database search. Advertiser disclosure
2 Year Discounted Variable Rate, Owner Occupier, Principal & Interest, <80% LVR
interest rate
comparison rate
Initial monthly repayment
2.10% p.a.variable for 24 months and then 2.50% p.a.variable
2.46% p.a.
New super low introductory rate home loan for two years. Min 20% deposit. No monthly or ongoing fees. Fast settlement times. Mozo award-winning online lender. Friendly, local Australian based team.
New super low introductory rate home loan for two years. Min 20% deposit. No monthly or ongoing fees. Fast settlement times. Mozo award-winning online lender. Friendly, local Australian based team.
interest rate
2.10% p.a.variable for 24 months and then 2.50% p.a.variable
comparison rate
2.46% p.a.
interest rate
2.10% p.a.variable for 24 months and then 2.50% p.a.variable
Rates have moved in line with RBA. Fast and efficient online application. Automatic discounts as loan is paid down. Free extra repayments and redraw facility. Zero fees. Min 40% deposit required.
Rates have moved in line with RBA. Fast and efficient online application. Automatic discounts as loan is paid down. Free extra repayments and redraw facility. Zero fees. Min 40% deposit required.
Competitive low variable rate. No application or account management fees. Flexibility to split your loan and set different repayment types. Fee free withdrawals of your savings.
Competitive low variable rate. No application or account management fees. Flexibility to split your loan and set different repayment types. Fee free withdrawals of your savings.
interest rate
2.39% p.a.variable
comparison rate
2.39% p.a.
interest rate
2.39% p.a.variable
comparison rate
2.39% p.a.
Upfront fees
$0
Ongoing fees
$0.00
Discharge Fee
$400.00
Extra repayments
yes - free
Redraw facility
yes - free
Offset account
no
Maximum loan to value ratio
60.00%
minimum borrowing amount
$150,000
maximum borrowing amount
$5,000,000
type of mortgage
Variable
Repayment types
Principal & Interest
Availability
Owner Occupier
Repayment options
Monthly
Special Offers
Read our Mozo Review to learn more about the Basic Home Loan
For more information about these awards go to the link at the bottom of this table.
Variable Home Loan
Owner Occupier, Principal & Interest
interest rate
comparison rate
Initial monthly repayment
2.24% p.a.variable
2.24% p.a.
Purchase and Refinance. No upfront or ongoing fees. Fast digital application. 100% offset sub account with no account or redraw fees. Comes with a Visa debit card, mobile App, and digital wallet. 20% deposit or equity required. Mozo Experts Choice winner for Best New Home Loan and Low Cost Home Loan 2022. 18 years and over.
Purchase and Refinance. No upfront or ongoing fees. Fast digital application. 100% offset sub account with no account or redraw fees. Comes with a Visa debit card, mobile App, and digital wallet. 20% deposit or equity required. Mozo Experts Choice winner for Best New Home Loan and Low Cost Home Loan 2022. 18 years and over.
For more information about these awards go to the link at the bottom of this table.
Variable Rate Home Loan
Owner Occupier, Principal & Interest, LVR <80%
interest rate
comparison rate
Initial monthly repayment
2.09% p.a.variable
1.99% p.a.
$5000 refinance cashback. Owner-occupier refinancers only living in NSW/VIC/SA metro and inner regional areas. Receive up to an additional 0.15% off your rate as you pay off the loan. Receive bonus payments up to $2,500. T&Cs apply.
$5000 refinance cashback. Owner-occupier refinancers only living in NSW/VIC/SA metro and inner regional areas. Receive up to an additional 0.15% off your rate as you pay off the loan. Receive bonus payments up to $2,500. T&Cs apply.
interest rate
2.09% p.a.variable
comparison rate
1.99% p.a.
interest rate
2.09% p.a.variable
comparison rate
1.99% p.a.
Upfront fees
$0
Ongoing fees
$0.00
Discharge Fee
$0.00
Extra repayments
yes - free
Redraw facility
no
Offset account
no
Maximum loan to value ratio
80.00%
minimum borrowing amount
$20,000
maximum borrowing amount
$2,000,000
type of mortgage
Variable
Repayment types
Principal & Interest
Availability
Owner Occupier
Repayment options
Fortnightly, Monthly
Special Offers
Receive $5000 cashback for Owner Occupier Refinancers only in eligible areas only.
Owner Occupier, Principal & Interest, LVR <60%, Refinance Only
interest rate
comparison rate
Initial monthly repayment
2.24% p.a.variable
2.25% p.a.
A great option for refinancers looking for an alternative, the G &C Mutual Bank’s Momentum Home Loan offers a competitively low rate for a fixed period. It features a 100% offset account in addition to unlimited extra repayments.
A great option for refinancers looking for an alternative, the G &C Mutual Bank’s Momentum Home Loan offers a competitively low rate for a fixed period. It features a 100% offset account in addition to unlimited extra repayments.
For more information about these awards go to the link at the bottom of this table.
Discount Great Rate Home Loan
LVR<90%, over $150k
interest rate
comparison rate
Initial monthly repayment
3.09% p.a. fixed 1 year
2.28% p.a.
Get one of the lowest rates on the market with this fixed rate mortgage. Available with just a 10% deposit. Guarantor option available. NSW, QLD and ACT residents only. Mozo Experts Choice Awards - Home Lender Bank of the Year 2022.
Get one of the lowest rates on the market with this fixed rate mortgage. Available with just a 10% deposit. Guarantor option available. NSW, QLD and ACT residents only. Mozo Experts Choice Awards - Home Lender Bank of the Year 2022.
Enjoy a great low rate with no ongoing fees. Ability to split your loan between fixed and variable. 100% offset account. Refinance and get up to $3,000 cashback. LVR ≤90%. $2,000 cashback for loans ≥ $250k, plus bonus $1,000 for loans ≥ $500k. Limited time offer extended, T&Cs apply.
Enjoy a great low rate with no ongoing fees. Ability to split your loan between fixed and variable. 100% offset account. Refinance and get up to $3,000 cashback. LVR ≤90%. $2,000 cashback for loans ≥ $250k, plus bonus $1,000 for loans ≥ $500k. Limited time offer extended, T&Cs apply.
interest rate
2.94% p.a.variable
comparison rate
3.35% p.a.
interest rate
2.94% p.a.variable
comparison rate
3.35% p.a.
Upfront fees
$0
Ongoing fees
$395.00 yearly
Discharge Fee
$0.00
Extra repayments
yes - free
Redraw facility
yes - free
Offset account
yes
Maximum loan to value ratio
80.00%
minimum borrowing amount
$150,000
maximum borrowing amount
-
type of mortgage
Variable
Repayment types
Principal & Interest
Availability
Owner Occupier
Repayment options
Weekly, Fortnightly, Monthly
Special Offers
Up to $3,000 cashback when you refinance your home loan from another financial institution when you apply by 30 June 2022 and are funded by 31 Aug 2022, LVR <90%. $2,000 cashback for loan amounts of $250,000 and an bonus $1,000 for $500,000 or more.
Yard’s low-rate variable special home loan is packed with all features – unlimited additional repayments, free redraw, optional 100% offset account. Enjoy a simple online application. Special rate applies to home loan applications submitted by 31st May 2022.
Yard’s low-rate variable special home loan is packed with all features – unlimited additional repayments, free redraw, optional 100% offset account. Enjoy a simple online application. Special rate applies to home loan applications submitted by 31st May 2022.
interest rate
1.99% p.a.variable
comparison rate
2.02% p.a.
interest rate
1.99% p.a.variable
comparison rate
2.02% p.a.
Upfront fees
$530
Ongoing fees
$0.00
Discharge Fee
$500.00
Extra repayments
yes - free
Redraw facility
yes - free
Offset account
Optional - $10 per month
Maximum loan to value ratio
80.00%
minimum borrowing amount
$150,000
maximum borrowing amount
$1,000,000
type of mortgage
Variable
Repayment types
Principal & Interest
Availability
Owner Occupier
Repayment options
Weekly, Fortnightly, Monthly
Special Offers
Special rate applies to home loan applications submitted by 31 May 2022.
Flexible loan structure. Ability to open up to 10 offset accounts per loan account. Includes a Debit Mastercard and transaction account for everyday transactions. All ATM fees in Australia are instantly refunded.
Flexible loan structure. Ability to open up to 10 offset accounts per loan account. Includes a Debit Mastercard and transaction account for everyday transactions. All ATM fees in Australia are instantly refunded.
Fixed, Owner Occupier, Principal & Interest, LVR 70-80%
interest rate
comparison rate
Initial monthly repayment
4.49% p.a. fixed 2 years
2.83% p.a.
Get a flexible loan structure with up to six loan accounts with different rate types. Make free extra repayments. Enjoy free redraw facility. No upfront or ongoing fees. Option to earn Qantas points.
Get a flexible loan structure with up to six loan accounts with different rate types. Make free extra repayments. Enjoy free redraw facility. No upfront or ongoing fees. Option to earn Qantas points.
interest rate
4.85% p.a. fixed 3 years
comparison rate
3.08% p.a.
interest rate
4.85% p.a. fixed 3 years
comparison rate
3.08% p.a.
Upfront fees
$0
Ongoing fees
$0.00
Discharge Fee
$400.00
Extra repayments
yes - up to $10,000 p.a.
Redraw facility
yes - free
Offset account
no
Maximum loan to value ratio
80.00%
minimum borrowing amount
$150,000
maximum borrowing amount
$750,000
type of mortgage
Fixed
Repayment types
Principal & Interest
Availability
Owner Occupier
Repayment options
Monthly
Special Offers
Read our Mozo Review to learn more about the Basic Home Loan
For more information about these awards go to the link at the bottom of this table.
No Frills Home Loan
Owner Occupier, Principal & Interest, LVR <70%
interest rate
comparison rate
Initial monthly repayment
2.24% p.a.variable
2.24% p.a.
Earn 200,000 bonus Qantas Points with the Qudos Bank Qantas Points Home Loan when you apply between 01/04/22-30/06/22 and settle by 30/09/22. Be rewarded year after year with Qantas Points each month for the life of your loan. Save with $0 bank fees for established homes. Fee-free redraw. Free unlimited extra repayments. Multiple offset accounts available.
Compare
Compare
Details Close
No Frills Home Loan
Earn 200,000 bonus Qantas Points with the Qudos Bank Qantas Points Home Loan when you apply between 01/04/22-30/06/22 and settle by 30/09/22. Be rewarded year after year with Qantas Points each month for the life of your loan. Save with $0 bank fees for established homes. Fee-free redraw. Free unlimited extra repayments. Multiple offset accounts available.
Interested in a Qudos Bank home loan? Great choice!
Qudos Bank home loan includes:
Competitive rates
No application fee or annual fee
Borrow up to 80% of the property value
Next step: fill out your details below, so Qudos Bank can get in touch for an obligation-free chat about your needs.
Thank you for your enquiry
We’ve let Qudos Bank know you’re interested in their home loan and one of their home loan experts will be in touch shortly to discuss your needs. We’ve also sent you an email confirmation as a record of your enquiry.
In preparation for your discussion with Qudos Bank, you might want to have on hand the following info:
Property details
Your employment details
If refinancing, the current home loan provider and product
Team Mozo
Discounted Home Value Loan
Owner Occupier, Principal & Interest, LVR <70%
interest rate
comparison rate
Initial monthly repayment
2.27% p.a.variable
2.28% p.a.
Enjoy competitive rates for owner occupiers. Enjoy unlimited free extra repayments. Flexibility to redraw additional payments for free. No ongoing monthly service fee. Receive $3,288 cashback when you refinance an existing home loan of $250,000. Must apply by 31 May 2022 and settle by 31 July 2022.
Enjoy competitive rates for owner occupiers. Enjoy unlimited free extra repayments. Flexibility to redraw additional payments for free. No ongoing monthly service fee. Receive $3,288 cashback when you refinance an existing home loan of $250,000. Must apply by 31 May 2022 and settle by 31 July 2022.
interest rate
2.27% p.a.variable
comparison rate
2.28% p.a.
interest rate
2.27% p.a.variable
comparison rate
2.28% p.a.
Upfront fees
$0
Ongoing fees
$0.00
Discharge Fee
$300.00
Extra repayments
yes - free
Redraw facility
yes - free
Offset account
no
Maximum loan to value ratio
70.00%
minimum borrowing amount
$50,000
maximum borrowing amount
$15,000,000
type of mortgage
Variable
Repayment types
Principal & Interest
Availability
Owner Occupier
Repayment options
Weekly, Fortnightly, Monthly
Special Offers
Receive $3,288 cashback when you refinance an existing home loan of $250,000. Must apply by 31 May 2022 and settle by 31 July 2022.
Owner Occupier, Principal & Interest and Interest Only
interest rate
comparison rate
Initial monthly repayment
2.74% p.a.variable
2.75% p.a.
Competitive variable interest rate. No establishment or ongoing monthly fees to pay. Optional offset account available for 0.10%. Unlimited redraws. Extra repayments allowed. No minimum loan amount.
Competitive variable interest rate. No establishment or ongoing monthly fees to pay. Optional offset account available for 0.10%. Unlimited redraws. Extra repayments allowed. No minimum loan amount.
Competitive variable rates. Free extra repayments and redraws. No Lender’s Mortgage Insurance. Multiple offset accounts available. Fast digital application. 40% deposit required.
Competitive variable rates. Free extra repayments and redraws. No Lender’s Mortgage Insurance. Multiple offset accounts available. Fast digital application. 40% deposit required.
interest rate
2.14% p.a.variable
comparison rate
2.43% p.a.
interest rate
2.14% p.a.variable
comparison rate
2.43% p.a.
Upfront fees
$250
Ongoing fees
$250.00 yearly
Discharge Fee
$300.00
Extra repayments
yes - free
Redraw facility
yes - free
Offset account
yes
Maximum loan to value ratio
60.00%
minimum borrowing amount
-
maximum borrowing amount
-
type of mortgage
Variable
Repayment types
Principal & Interest
Availability
Owner Occupier
Repayment options
Weekly, Fortnightly, Monthly
Special Offers
Read our Mozo Review to learn more about the Own Home Loan
Owner Occupier, Principal & Interest, <70% LVR, $150,000+
interest rate
comparison rate
Initial monthly repayment
2.38% p.a.variable
2.55% p.a.
An ongoing low variable interest rate with free redraw, flexible repayment options and one free valuation. Discounted Economy variable rate available for owner occupier lending with max LVR of 70%. Apply by 30 June 2022, settle by 30 September 2022, and receive $3,000 cashback (T&Cs apply).
Compare
Compare
Details Close
Economy Variable Home Loan
An ongoing low variable interest rate with free redraw, flexible repayment options and one free valuation. Discounted Economy variable rate available for owner occupier lending with max LVR of 70%. Apply by 30 June 2022, settle by 30 September 2022, and receive $3,000 cashback (T&Cs apply).
interest rate
2.38% p.a.variable
comparison rate
2.55% p.a.
interest rate
2.38% p.a.variable
comparison rate
2.55% p.a.
Upfront fees
$450
Ongoing fees
$10.00 monthly
Discharge Fee
$350.00
Extra repayments
yes - free
Redraw facility
yes - free
Offset account
no
Maximum loan to value ratio
70.00%
minimum borrowing amount
$150,000
maximum borrowing amount
-
type of mortgage
Variable
Repayment types
Principal & Interest
Availability
Owner Occupier
Repayment options
Weekly, Fortnightly, Monthly
Special Offers
$3,000 refinance cashback, min $250,000, 80% LVR or less. Apply before 30 June 2022, settle by 30 September 2022.
Interested in a Bank Of Queensland home loan? Great choice!
Bank Of Queensland home loans come with
Flexible repayment options
Available for Owner Occupiers and Investors
$3,000 cashback offer when you refinance. Limited time only, T&Cs apply.
Next step: fill out your details below, so Bank of Queensland can get in touch for an obligation-free chat about your needs.
Thank you for your enquiry
We’ve let Bank of Queensland know you’re interested in their home loan and one of their home loan experts will be in touch shortly to discuss your needs. We’ve also sent you an email confirmation as a record of your enquiry.
In preparation for your discussion with Bank of Queensland, you might want to have on hand the following info:
Property details
Your employment details
If refinancing, the current home loan provider and product
Team Mozo
Smart Booster Home Loan
1 Year Discounted Variable Rate, Owner Occupier, Principal & Interest, <80% LVR
interest rate
comparison rate
Initial monthly repayment
2.24% p.a.variable for 12 months and then 2.73% p.a.variable
2.72% p.a.
A super low introductory rate home loan with no monthly or ongoing fees. loans.com.au has some of the fastest settlement times on the market. They can meet 30-day settlement timeline so you can start saving thousands, as soon as possible! Mozo award-winning online lender, friendly and local Australian based team.
A super low introductory rate home loan with no monthly or ongoing fees. loans.com.au has some of the fastest settlement times on the market. They can meet 30-day settlement timeline so you can start saving thousands, as soon as possible! Mozo award-winning online lender, friendly and local Australian based team.
interest rate
2.24% p.a.variable for 12 months and then 2.73% p.a.variable
comparison rate
2.72% p.a.
interest rate
2.24% p.a.variable for 12 months and then 2.73% p.a.variable
Yard’s Investor Bundle home loan is packed with all features – unlimited additional repayments, free redraw, optional 100% offset account. Enjoy a simple online application. Special investor rate applies to combined home loan and investor bundles only (conditions apply).
Yard’s Investor Bundle home loan is packed with all features – unlimited additional repayments, free redraw, optional 100% offset account. Enjoy a simple online application. Special investor rate applies to combined home loan and investor bundles only (conditions apply).
Enjoy competitive rates for owner occupiers. Enjoy unlimited free extra repayments. Flexibility to redraw additional payments for free. No ongoing monthly service fee. Receive $3,288 cashback when you refinance an existing home loan of $250,000. Must apply by 31 May 2022 and settle by 31 July 2022.
Enjoy competitive rates for owner occupiers. Enjoy unlimited free extra repayments. Flexibility to redraw additional payments for free. No ongoing monthly service fee. Receive $3,288 cashback when you refinance an existing home loan of $250,000. Must apply by 31 May 2022 and settle by 31 July 2022.
interest rate
2.37% p.a.variable
comparison rate
2.38% p.a.
interest rate
2.37% p.a.variable
comparison rate
2.38% p.a.
Upfront fees
$0
Ongoing fees
$0.00
Discharge Fee
$300.00
Extra repayments
yes - free
Redraw facility
yes - free
Offset account
no
Maximum loan to value ratio
80.00%
minimum borrowing amount
$50,000
maximum borrowing amount
$15,000,000
type of mortgage
Variable
Repayment types
Principal & Interest
Availability
Owner Occupier
Repayment options
Weekly, Fortnightly, Monthly
Special Offers
Receive $3,288 cashback when you refinance an existing home loan of $250,000. Must apply by 31 May 2022 and settle by 31 July 2022.
Rates have moved in line with RBA. Enjoy zero fees and a speedy online application process. Free extra repayments and redraw facility. Flexible loan repayments. Minimum 20% deposit required.
Rates have moved in line with RBA. Enjoy zero fees and a speedy online application process. Free extra repayments and redraw facility. Flexible loan repayments. Minimum 20% deposit required.
We understand that you might have questions that need personal answers. We’ve teamed up with
Lendi to get you the answers you need and a home loan deal you deserve.
*WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate displayed is for a secured loan with monthly principal and interest repayments for $150,000 over 25 years.
Mozo provides general product information. We don't consider your personal objectives, financial situation or needs and we aren't recommending any specific product to you. You should make your own decision after reading the PDS or offer documentation, or seeking independent advice.
While we pride ourselves on covering a wide range of products, we don't cover every product in the market. If you decide to apply for a product through our website, you will be dealing directly with the provider of that product and not with Mozo.
Home loan lenders we compare at Mozo
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When you take out a home loan, your bank or lender applies an interest rate to the amount borrowed. This is expressed as a percentage, known as the Annualised Percentage Rate (APR), which represents the annual cost to borrow a sum of money.
To illustrate how this works, say you want to borrow $500,000 to purchase a home. Your lender agrees to lend you the money and charges an interest rate of 3% p.a. The amount of interest paid in this scenario is determined using the following formula:
(principal x interest rate) ÷ time = interest
So if we multiply $500,000 by 0.03, then divide it by 365 (the number of days in a year), we would get $41.10. This is the amount of interest you would be charged in a day. However, this will change as you chip away at your principal over time. To work out how much you would pay over the life of a loan, use our home loan repayments calculator.
How are home loan rates determined?
The official cash rate is set by the Reserve Bank of Australia (RBA), which meets on the first Tuesday of every month (except January) to decide whether it will stay the same, increase or decrease. It bases its decision on things like inflation, employment, and levels of spending and investment.
Banks and lenders will then set their own home loan interest rates based on the RBA’s decision, while also taking into account their own business costs.
Types of home loan interest rates
The type of interest rate you pay on your home loan can affect how much you pay overall and each month. There are pros and cons to each type, so it’s important to take the time to find out which will suit you best. Your options include:
Fixed rate
A fixed home loan interest rate locks in your repayment amount at a certain value and will remain the same for a set time, usually up to 5 years. This makes budgeting easier, as you’ll have a set amount that you need to pay each month that won’t be affected by rate increases.
The downside, however, is that if rates decrease while you’re on fixed term interest, you won’t reap any of the benefits. When your fixed term ends, you have the option to either enter into a new fixed rate or switch to variable rates. In general, fixed interest rate loans are less flexible than other types of mortgage rates, and you could end up paying penalties if you repay the loan early.
Variable rate
A variable home loan interest rate means that your repayments might change at any time, based on changes to the cash rate or the whims of your bank. There’s less security in this type of interest rate - your repayments are subject to rises and falls in the market.
However, it’s a popular type of home loan in Australia, as variable rates often sit lower than fixed rates. A variable interest rate might suit you if you're looking for flexibility, as you’ll have the option to make extra repayments and pay off your loan quicker.
Comparison rate
It can be hard to compare home loan rates sometimes. Aside from the interest rate, there might be extra fees and charges built into your home loan, which means the lowest headline interest rate might not always the best option. That’s where the comparison rate comes in.
The National Credit Code requires that lenders show comparison rates - which factor in interest, fees and charges - to give you a clearer idea of the true cost of a loan. So when you compare home loan interest rates on Mozo, you’ll see an interest rate plus a comparison rate for each product.
Keep in mind that comparison rates are a guide based on a secured loan of $150,000 over 25 years, with monthly principal and interest repayments. Different values or time frames on loans will mean different comparison rates. So while the comparison rates on our site are useful for choosing the best value home loan, to find out exactly how much interest you’ll be paying you'll need to check with your lender.
How are my home loan interest repayments calculated?
How much you pay each month will depend on numerous factors, including what type of rate you’re paying, how often your interest is calculated and how long your home loan term is for. One of the important factors in determining how your interest rates are calculated is whether your home loan is an interest only or principal and interest loan. Here’s the difference:
Interest only loans
With an interest only loan your monthly repayment consists of only the interest for the loan, and not the loan amount itself. The monthly savings can be significant if you’re not paying any of the principal loan amount, which might be a great short term solution if you’re running on a tight budget. The downside is that you won’t be making any progress toward actually owning your home.
Interest only loans are popular for investors, because they’re often counting on the value of the home increasing enough to sell the property, pay off the loan and make a profit.
Remember that you will eventually have to pay off the total loan amount, so while an interest only loan might be affordable in the short term, you should have a long term repayment plan in place.
Principal and interest loans
With a principal and interest loan, you’re paying interest, plus a part of the total loan amount each month. At the beginning of the loan, most of your repayment will go toward paying interest and a little will go toward the loan amount. As the principal amount gets lower, so does the interest you need to pay on it, so eventually, most of your monthly repayment will be going towards the principal, while a little goes to interest.
While you’ll be paying more each month than you would with an interest only loan, the good news is that by the end of your loan term, you’ll own your home entirely. You can use Mozo’s home loan repayments calculator to see not only how much your monthly repayments would be with either an interest only or principal and interest home loan, but also how much total interest you would pay with each one.
Peter Marshall has been working in the Australian banking and finance industry for over 20 years and oversees Mozo’s extensive product database. He is regularly sought out for his expert commentary and analysis on banking and interest rates trends by print, radio and TV media.
FAQs about home loan interest rates
Got more questions about home loans? We’ve got answers. Below, we run through some key bits of info to help you understand home loan interest rates, and put you on the right track to find a home loan that suits you.
The comparison rate is designed to give you an accurate picture of how much each home loan might cost you by taking into account fees and any other extra charges, so don’t forget to use it.
As mentioned above, the cash rate serves as a benchmark for mortgage rates, but where mortgage rates sit is ultimately up to individual lenders. This is why commercial interest rates are so much higher than the cash rate: lenders need to be able to cover their operating costs (staff, branches, marketing, interest paid out to customers, etc.) and make a profit at the same time.
It’s important to remember that while commercial interest rates tend to move in line with the cash rate, lenders are under no obligation to pass on an RBA cut to their customers in full, or at all.
Lenders will also charge different rates depending on the borrower and the type of loan. For example, interest rates are typically higher on investment loans than on owner occupier loans, as they are considered riskier. The same goes for interest only loans.
That depends. The RBA might decide to raise or lower the cash rate, prompting many lenders to make adjustments to their home loan rates. But lenders are known to make out-of-cycle decisions too, meaning they can increase or decrease rates at their own discretion, simply in response to business demands.
As everyone with a variable rate home loan knows, if your lender decides to raise rates, your repayments will also go up. The opposite will be true if your lender decreases rates. Even a small change in interest rates can make a big difference in the amount you pay each month. For an idea, use our rate change calculator.
If a bank or lender decides to raise or lower their mortgage rates, it will likely notify customers and inform them of any changes to their repayments. Customers who have arranged to pay just the minimum payment amount via direct debit should have their repayments automatically adjusted.
You have to weigh up the benefits and disadvantages to having extra features on your home loan. While some extras like an offset account, free extra repayments and repayment flexibility can save you money, others may not be so helpful and you generally pay a higher premium for a full features home loan. Take a careful look at the features being offered and decide if they are worth the extra cost. If you’re not sure exactly which feature might benefit you, check out Mozo’s guide to home loan features in a nutshell.
Your interest might be calculated daily, monthly, quarterly or annually. Daily interest is best because it’s calculated as your principal loan reduces, and so you’ll pay less interest all up. Annual interest, on the other hand, is calculated each day, but based on a yearly principal, which means it takes a whole year before you’ll pay less interest. If you’re on anything other than daily interest, try to time your monthly repayments to be before your interest is calculated, so you’ll be paying interest on the lowest principal possible.
Banks don’t necessarily advertise the fact, but it is possible to negotiate a cheaper home loan rate. Success rates will vary depending on the specifics of the loan, but it’s always worth approaching your lender to see if they’ll budge.
The main goal for your home loan should be to pay as little interest as possible while remaining realistic about what monthly repayments you can afford to make. Here are a few tips and tricks to help you reduce the amount of interest you pay on your home loan:
Pay off your loan as quickly as possible. The quicker you can get rid of your loan, the less interest you will pay. But be careful, as sometimes, particularly with fixed term interest rates, you may be charged extra fees or penalties for paying off your loan before the complete term is finished.
Switch to a shorter term. If your lender allows it, you may want to look at a shorter loan term. This would mean you’ll pay more each month, so be sure to check your budget before going ahead, but it will save you money overall. So, say you had a loan of $150,000, at an interest rate of 3.98%. On a 25 year term, you’d pay $790 each month and a total of $87,030 in fees and interest. If you reduced that to a 20 year term, your monthly payments would increase to $907, but all up, you’d only pay $67,774.
Take advantage of free extra repayments. Again, you’ll need to check that there are no fees or penalties for overpaying, but this can be an effective way to quickly reduce your principal, and therefore pay less interest. If you’re budget allows for it, you can pay extra in lump sums or added to your monthly repayments to pay off your loan faster.
Use an offset account. An offset account is a bank account attached to your home loan. The balance you keep in this account is offset against the principal of your home loan to help you reduce the amount of interest you will pay. For example, if you had a home loan of $400,000 and $20,000 in your offset account, you’d only be paying interest on $380,000 of your loan. Think about getting your salary put into your offset account to get the most out of this feature.
There are heaps of competitive home loan interest rates available and it’s worth the time to do some research and find a rate that suits your budget and lifestyle. To get you started, check out these great tools at Mozo:
Home loans comparison page - find out what home loan rates are currently on offer from hundreds of Australian financial institutes, from the big banks down to small online lenders and credit unions.
Home loans calculators - crunch the numbers on your home loan and find the answer to questions like ‘How will rate changes affect my repayments?’ and ‘How much can I afford to borrow?’
Home loan guides - we’ve got a guide on all the trickiest parts of home loans to help you through the process, all the way from deposits to refinancing.
You can also check out our handy interest rate guides for information on how interest rates work and help calculating what interest you'll pay on your home loan.
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