The interest rate charged on your home loan is arguably the biggest factor that affects the total cost. That being said, a low rate home loan isn't everything. Mortgages with the lowest home loan interest rates are popular among borrowers, as the lower your interest rate, the lower your interest repayments will be on top of your principal. However, there is more to a home loan than the interest rate.
Many lenders also charge fees with their mortgages, which can make a significant impact on the budget of a borrower. These can include:
- Upfront fees, like application fees
- Ongoing fees, like annual fees
- Break fees if ending a fixed rate term early
- Extra or early repayment fees
- Redraw fees
- Exit fees
A mortgage with a low interest rate and high ongoing fees may turn out to be more expensive in total than a mortgage with a higher interest rate with lower fees and charges. For this reason, it may be worth also looking at the comparison rate of the home loan.
A comparison rate takes stock of the advertised rate, as well as most of the fees charged, on a 25-year, $150,000 home loan. While this loan amount is lower than the average mortgage nowadays, it's still a helpful tool that shows you if a home loan has any sneaky fees. For example, if the comparison rate was 1-2% higher than the advertised rate, you could assume the lender charged costly ongoing fees. However, it’s worth noting that while comparison rates are a good starting point, they may not provide an exact measure of the cost of a loan to you.
Even though comparison rates take into account several factors beyond the interest rate, there are other things that could affect the cost of the loan, including the size of your deposit and whether you need to pay for Lenders Mortgage Insurance (LMI), any fee waivers or cashback offered by the lender, and your eligibility for any applicable government grants (such as the First Home Owner Grant).
Besides the interest rates and fees charged on a loan, there may be other factors that could help you manage your mortgage better and potentially save you money. For instance, you may prefer a home loan that comes with helpful features, such as a redraw facility, so you may chip away at your mortgage amount owing and ideally pay the debt off faster. Home loans with features may come with higher interest rates, so it’s all about what you’re willing to prioritise and pay for. If you want to avoid paying as many fees as possible, a no-frills basic home loan may better suit your budget.
What are the lowest home loan rates available?
The interest rate you pay on your home loan is tied to the cash rate set by the RBA. When the RBA raises the cash rate, lenders often pass on the rate increase to customers, causing variable mortgage interest rates to go up. However, not all lenders may pass on the full rate hike. Some may only pass on a portion of it, or they might do it gradually to stay competitive.
If you simply just want to view some lower-rate home loan options, you can do so by using the comparison table on this page. Filter down your options as you see fit (fixed or variable rates, with or without features etc.) and then click on the 'sort' button. Choose to sort your results by the lowest interest rates or comparison rates.
However, keep in mind that there’s more to a home loan than the interest rate you’re charged on it. It’s important to choose a home loan that best suits your lifestyle, financial situation and personal goals. Finding the best home loan may require you to look beyond the lowest interest rates. Comparing loans from different lenders and assessing the rates, fees, features and benefits can help you work out the best mortgage option for you and your situation.