Compare low rate home loans

The thing about home loans is that they’re all different - as are home loan interest rates. That’s important, because the rate you get with your mortgage is going to play a major role in determining how much you pay over the life of the loan.

That’s why, when it comes to comparing home loans, finding the lowest home loan interest rate possible will be right at the top of the priority list for many borrowers. After all, if you can find a way to reduce the total amount of interest you pay by thousands or even tens of thousands of dollars, why wouldn’t you? 

Factors that influence your home loan rate 

Not every borrower is going to be able to snag the very lowest home loan rate on the market, because there are a number of factors that banks and other lenders take into account when determining their rates. Some of these include: 

• The type of borrower you are: owner occupier or investor

• The size of your loan

• The type of repayments: principal and interest or interest-only

• The type of rate you want: fixed or variable

• Your loan-to-value ratio (LVR) - i.e. the size of your deposit or your equity

All of that is to say that there are low rate home loans available for various types of borrowers and for different circumstances, of which we’ll go into more detail further below.

What is a low interest rate for a home loan in Australia?

Plenty of Australians will be able to remember sky high mortgage rates of up to 17% p.a. back in the late 1980s and early 1990s, but they have steadily fallen over the decades. More recently, thanks in part to six cuts to the official cash rate from the Reserve Bank since June 2019, rates have dropped even lower - to the point where they’re at some of the lowest levels they’ve ever been. 

Before we get into specific low interest home loans, it’s worth setting a baseline by looking at some average home loan rates. Since 2015, Mozo has used the hundreds of loans being tracked in our database to calculate average rates for different types of borrowers, which you can check out in detail for yourself over on our Australian home loan statistics page. 

But what does a really sharp rate look like at present? Here’s a selection of some of the lowest home loan interest rates currently in the Mozo database.

Lowest home loan rates for owner occupiers (80% LVR) - November 2021

• Variable rate: 1.88% p.a. (1.97% p.a. comparison rate*) on the Reduce Home Loans Super Saver Variable

• 1-year fixed rate: 1.59% p.a. (2.15% p.a. comparison rate*) on the Greater Bank Great Rate Home Loan 

• 2-year fixed rate: 1.59% p.a. (2.10% p.a. comparison rate*) on the Greater Bank Great Rate Home Loan 

• 3-year fixed rate: 1.89% p.a. (1.93% p.a. comparison rate*) on the Police Credit Union Better Home Loan

• 4-year fixed rate: 1.89% p.a. (2.24% p.a. comparison rate*) on the Gateway Bank Green Plus Home Loan

• 5-year fixed rate: 2.47% p.a. (2.14% p.a. comparison rate*) on the FreedomLend Fixed Home Loan

Lowest home loan rates for investors (80% LVR) - November 2021

• Variable rate: 1.99% p.a. (2.38% p.a. comparison rate*) on the Queensland Country Bank Discount Ultimate Home Loan (Package)

• 1-year fixed rate: 1.89% p.a. (2.54% p.a. comparison rate*) on the Greater Bank Great Rate Home Loan 

• 2-year fixed rate: 1.99% p.a. (2.50% p.a. comparison rate*) on the Greater Bank Great Rate Home Loan 

• 3-year fixed rate: 2.09% p.a. (2.46% p.a. comparison rate*) on the UBank UHomeLoan

• 4-year fixed rate: 2.49% p.a. (3.40% p.a. comparison rate*) on the Police Credit Union Fixed Rate Home Loan

• 5-year fixed rate: 2.54% p.a. (2.57% p.a. comparison rate*) on the UBank UHomeLoan

Like savings account or credit card rates, the home loan rate ‘landscape’ is always changing though, which means that a home loan rate which is competitive one week won’t necessarily be as competitive in a month’s time. So if you’re interested in keeping up to date with some of the latest home loan offers, it’s worth regularly checking in on the rates on this page, or visiting our other dedicated home loan pages for variable rates, fixed rates, refinancers and investors.

What types of home loans have low interest rates?

As we alluded to above, different types of home loans come with higher and lower interest rates. This is largely a matter of risk (as calculated by lenders), which is why ‘less risky’ loans tend to come with lower rates. Now, it’s important to say that rates ultimately differ from one lender to the next, but there are some broad generalisations that hold true between different types of home loans. Here are a few examples:

Owner occupiers vs investors 

While they were once roughly similar, there’s now a noticeable gap between owner occupier home loan rates and investment home loan rates. On average, lenders offer lower rates to owner occupiers than they do to investors, because property investors are generally considered riskier. That’s not to say that there aren’t low home loan rates available to investors, but they may not be eligible for some of the very sharpest rates around.  

Principal and interest vs interest-only

Many mortgage lenders offer customers the choice between making principal and interest or interest-only repayments. Some borrowers - particularly investors - elect to go interest-only on their loans for a limited amount of time (generally up to 5 years), as it’s a way to initially make lower repayments. However, interest-only home loans tend to come with higher interest rates than principal and interest home loans because interest-only borrowers are deemed to be at a higher risk of defaulting. 

High deposit vs low deposit 

When it comes to determining your home loan rate, the loan-to-value ratio (LVR) is a major factor. In short, LVR is the amount you’re borrowing versus the value of the property, which is then used to calculate your risk as a borrower. Generally speaking, if you have a larger initial deposit or built-up equity in the home (if you’re refinancing) which means your LVR is below 80%, you’ll be considered a ‘safer’ borrower by many lenders and therefore will often have access to lower rates. On the flipside, low deposit home loans tend to come with higher rates. 

Fixed rates vs variable rates

One of the big decisions you’ll need to make when taking out a mortgage is whether you want to lock in a fixed rate for a few years or go with a variable rate. There are positives and negatives to each option, including the features and loan flexibility on offer, but you’ll also need to weigh up the rates on offer. At present though there’s not too much difference between some of the lowest home loan rates available on both fixed rate and variable rate loans, which means there’s plenty of choice.

What should I consider as well as a low interest rate when getting a mortgage? 

Nabbing a low interest home loan is, perhaps, going to be the major priority for many borrowers, but it won’t be the only consideration. Some of the other factors that are worth weighing up include: 

• Fees: While interest is likely to be the biggest over loan cost, fees can’t be discounted - particularly annual or monthly service fees which can really add up over the life of a loan. There are also a number of one-off fees that borrowers will want to take note of, such as application fees, legal fees, settlement fees, valuation fees and discharge fees. 

• Features: Want to reduce the amount of interest you pay on your loan or split your loan between a fixed and variable rate? Having access to home loan features like an offset account, redraw facility, split loan option or even repayment holidays may be important to you, though not all loans come with all of these features. 

• Flexibility: While a lot of the features above may provide you with extra flexibility when it comes to managing your loan, you may also want to look out for other flexible options like being able to make your repayments on weekly, fortnightly or monthly basis, or to make extra contributions to your loan balance in order to pay it off faster.

What will I need to qualify for the lowest interest rate?

As we mentioned earlier, lenders take a multitude of factors into account when it comes to the rates they offer. But whether you’re an owner occupier, investor, refinancer or first home buyer, there are some of the minimum requirements you’ll typically need to meet in order to get a low rate home loan: 

• Have an LVR below 80%: A borrowers’ loan-to-value ratio will affect the interest rate they can receive, with ‘safer’ borrowers typically able to access lower rates than those with higher LVRs. Generally those with an LVR below 80% can expect to get lower rates, and lenders are increasingly offering even sharper rates for borrowers with LVRs below 70% or even 60%.

• Make principal and interest repayments: Banks and lenders almost always charge a premium for borrowers who elect to make interest-only repayments on their loan, so if you’re looking to grab a low interest home loan then you should be prepared to make principal and repayments on it. 

• Opt for a basic loan: While there are certainly a number of packaged home loan options that also come with competitive interest rates, the mortgages with the lowest home loan interest rates tend to be more ‘basic’ home loans. 

Which lenders offer the lowest rates? 

In Australia the home loan market is dominated by the big four banks: ANZ, Commonwealth Bank, NAB and Westpac. While these major players have the most customers, they often don’t provide the lowest home loan interest rates around. So who does? Unfortunately, it’s not as simple as pointing to one particular lender that does offer the lowest rates, because rates always chop and change. If you are on the hunt for a sharper rate, comparing loans from a range of different lenders outside of the big four might not be a bad move though. These include: 

• Challenger banks: While not as large as Australia’s four major players, larger ‘challenger’ banks like BOQ, HSBC, ING, Macquarie and Suncorp often have many of the benefits of the big four (like big customer service operations or apps and online platforms) while also offering competitive mortgage rates. 

• Credit unions and mutual banks: Australia is home to a large number of customer-owned banks, mutuals and credit unions, including the likes of Bank Australia, Great Southern Bank and Newcastle Permanent. In addition to their community and customer focus, these lenders often offer sharp rates with their home loans. 

• Online lenders: If there’s one group of lenders synonymous with low rate home loans it’s online lenders. Because they predominantly operate online without the normal overheads of a bank, online lenders like Homestar, loans.com.au and Well Home Loans are able to offer consistently competitive rates. 

• Fintechs: Similar to online lenders, emerging fintechs are often able to pass on reduced costs (and lower rates) thanks to their digital approach to lending. Fintech lenders are also characterised by their innovations - for example, Athena has an automatic rate drop feature which kicks in once a borrower's LVR drops below particular LVR tiers.