Homestar ups the ante with new lowest rate in the country, ahead of RBA

Laine Gordon-02/11/2020- 4 min read

Homestar Finance has announced a new ongoing variable rate of just 1.79 per cent on the eve of a potential RBA cut.

This is now the lowest ongoing variable mortgage rate in Australia.

Homestar Finance Star Gold loan

Rate: 1.79% ongoing variable, 1.84% comparison rate
Fees: $911 upfront, $0 ongoing
Conditions: owner occupiers paying principal and interest, 60% loan to value ratio, loans up to $850,000.

How much the average borrower could save by refinancing (including switch costs)

A typical borrower with $400k loan balance who refinances to Homestar could potentially save $4,290 in the first year, or $25,287 over five years.

This is significantly more than a refinancer who switches to the average new customer rate of 2.69 per cent, as recorded by the RBA (see table below).

Potential savings by refinancing a $400k loan

	Switch to Homestar rate	Switch to av. new cust. rate
1 year	$4,290	$1,635
5 years	$25,287	$9,203

Notes: based on an owner occupier paying P&I with a $400K balance outstanding 5 years into a 30 year loan. Switching from the average existing customer rate of 3.19% to the average new customer rate of 2.69%, according to the RBA. Based on interest paid and fees. Fees include discharge fee from old lender and upfront fees from new lender but not government switching fees.

Sally Tindall, research director at RateCity.com.au, said lenders were neck-and-neck in the race to have the lowest rate.

“At 1.79 per cent, this is now the lowest home loan rate available in Australia, but with an RBA cut potentially just hours away rates are likely to keep on falling,” she said.

“Lenders are leap-frogging under each other to take out the title of the lowest rate loan. We aren’t at the bottom just yet.

“The big question is whether the banks will pass on an RBA cut to their existing customers.

"There are a lot of mortgage holders who aren’t in a position to refinance. Right now they can only dream of having a rate that starts with a 2, let alone a 1,” she said.

Sharpest loans for people with the biggest deposits

RateCity analysis shows 20 lenders offer discounted rates for people who have a loan to value ratio of 60 per cent, including St George, Bank of Melbourne and Macquarie.

“Many homeowners might not know they are eligible for these rock-bottom rates,” she said.

“If you’ve been paying down your loan for more than five years, and your property’s gone up in value, there’s a chance you might qualify.

“Check the vitals on your home loan – your rate, how much you owe and how much your property is worth. If you haven’t refinanced for a few years, you’ll be amazed at what lenders are willing to offer,” she said.

How does this 1.79 per cent rate compare?

Lowest ongoing variable rates on RateCity.com.au

Lender	Advertised rate
Homestar Finance	1.79%
Reduce Home Loans	1.89%
Pacific Mortgage Group	1.99%
Freedom Lend	2.17%
Well Home Loans	2.17%

Lowest owner-occupier home loan rates on RateCity.com.au

	Lender	Advertised rate
Variable	Homestar Finance	1.79%
1-year fixed	Reduce Home Loans	1.90%
2-year fixed	Illawarra Credit Union	1.99%
3-year fixed	Bank First/ Hume Bank	1.99%
5-year fixed	Citi Bank	2.39%

Big four banks’ lowest home loan rates

Lender	Advertised variable	Advertised	Advertised
Lender	Advertised variable	2-yr fixed	3-yr fixed
CBA	2.69%	2.29%	2.29%
Westpac	2.19% for 2 yrs then 2.69%	2.19%	2.19%
NAB	2.69%	2.19%	2.29%
ANZ	2.72%	2.29%	2.29%

Note: Applications for the Homestar Finance Star Gold loan must be made by 31^st December 2020 and loans settled by 31^st March 2021.

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Laine Gordon

Head Of Public Relations

Laine Gordon is the Head of Public Relations at RateCity. With a background in journalism, Laine brings over a decade of experience in personal finance to the team. She is passionate about helping people get out of debt, save money, and make better decisions about their own finances.

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Data last updated on 26 Feb 2021

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If you are on a variable rate home loan, every so often your rate will be subject to increases and decreases. Rate changes are determined by your lender, not the Reserve Bank of Australia, however often when the RBA changes the cash rate, a number of banks will follow suit, at least to some extent. You can use RateCity cash rate to check how the latest interest rate change affected your mortgage interest rate.

When your rate rises, you will be required to pay your bank more each month in mortgage repayments. Similarly, if your interest rate is cut, then your monthly repayments will decrease. Your lender will notify you of what your new repayments will be, although you can do the calculations yourself, and compare other home loan rates using our mortgage calculator.

There is no way of conclusively predicting when interest rates will go up or down on home loans so if you prefer a more stable approach consider opting for a fixed rate loan.

Fixed rate

A fixed rate home loan is a loan where the interest rate is set for a certain amount of time, usually between one and 15 years. The advantage of a fixed rate is that you know exactly how much your repayments will be for the duration of the fixed term. There are some disadvantages to fixing that you need to be aware of. Some products won’t let you make extra repayments, or offer tools such as an offset account to help you reduce your interest, while others will charge a significant break fee if you decide to terminate the loan before the fixed period finishes.

Variable rate

A variable rate home loan is one where the interest rate can and will change over the course of your loan. The rate is determined by your lender, not the Reserve Bank of Australia, so while the cash rate might go down, your bank may decide not to follow suit, although they do broadly follow market conditions. One of the upsides of variable rates is that they are typically more flexible than their fixed rate counterparts which means that a lot of these products will let you make extra repayments and offer features such as offset accounts.

Split rates home loans

A split loan lets you fix a portion of your loan, and leave the remainder on a variable rate so you get a bet each way on fixed and variable rates. A split loan is a good option for someone who wants the peace of mind that regular repayments can provide but still wants to retain some of the additional features variable loans typically provide such as an offset account. Of course, with most things in life, split loans are still a trade-off. If the variable rate goes down, for example, the lower interest rates will only apply to the section that you didn’t fix.

The comparison rate is a more inclusive way of comparing home loans that factors in not only on the interest rate but also the majority of upfront and ongoing charges that add to the total cost of a home loan.

The rate is calculated using an industry-wide formula based on a $150,000 loan over a 25-year period and includes things like revert rates after an introductory or fixed rate period, application fees and monthly account keeping fees.

In Australia, all lenders are required by law to publish the comparison rate alongside their advertised rate so people can compare products easily.

The standard variable rate (SVR) is the interest rate a lender applies to their standard home loan. It is a variable interest rate which is normally used as a benchmark from which they price their other variable rate home loan products.

A standard variable rate home loan typically includes most, if not all the features the lender has on offer, such as an offset account, but it often comes with a higher interest rate attached than their most ‘basic’ product on offer (usually referred to as their basic variable rate mortgage).

The Home Loan Rate Promise is RateCity putting its money where its mouth is. We believe that too many Australians are paying too much for their home loans. We’re so confident we can help Aussies save money, if we can’t beat your current rate, we’ll give you a $100 gift card.*

There are two reasons it pays to check your rate with the Home Loan Rate Promise:

You can find out how much you could save on your home loan by switching to a loan with a lower interest rate
If we can’t beat your current rate, you can claim a $100 gift card with our Home Loan Rate Promise*

No. Temporary discounts to home loan interest rates will expire after a limited time, so they aren’t valid for comparing home loans as part of the Home Loan Rate Promise.

However, if your home loan has been discounted from the lender’s standard rate on a permanent basis, you can check if we can find an even lower rate that could apply to you.

A variable rate can fluctuate over the life of a loan as determined by your lender. While the rate is broadly reflective of market conditions, including the Reserve Bank’s cash rate, it is by no means the sole determining factor in your bank’s decision-making process.

A fixed rate is one which is set for a period of time, regardless of market fluctuations. Fixed rates can be as short as one year or as long as 15 years however after this time it will revert to a variable rate, unless you negotiate with your bank to enter into another fixed term agreement

Variable rates is that they are typically more flexible than their fixed rate counterparts which means that a lot of these products will let you make extra repayments and offer features such as offset accounts however fixed rates do offer customers a level of security by knowing exactly how much they need to set aside each month.

Getting home loan pre-approval helps you work out a budget to help you search for a suitable property and make an offer with confidence. Once you put in an application, you should get your pre-approval outcome within two business days. To help get a fast turnaround time of your pre-approval application, ensure all the information and documentation that Suncorp requires. This includes proof of identification, recent payslips, bank account and credit card statements.

You can submit the home loan pre-approval application online. You’ll be asked for information about your income, expenses, assets, and debts. It should take you about 10 minutes to fill out the application, and you can do it free of charge. A Suncorp lending specialist will review your application and contact you within 24 hours or the next working day. Suncorp will not run a credit check until you have heard from this lending specialist.

Once you get Suncorp home loan pre-approval, it’s valid for 90 days. If you don’t find a property you wish to buy in this time you may be able to apply for an extension, speak to your Suncorp lending specialist about this.

If you’re applying for a home loan with UBank, you can first get an approval in principle. You’ll need to provide information about your job and earnings, your household expenses, the assets you own and the debts you owe.

UBank will assign a home loan specialist to discuss these details over a phone call, which can take about 30 minutes.

The bank will then confirm if you’ve received in-principle approval for your home loan. Depending on how you submit your documents, this could take a few days or a few weeks. If successful, the approval will be valid for 60 days.

Qualifying for a home loan without a full-time job may be challenging, but it can be done. The first step is to understand how a CBA home loan is assessed when you have casual employment.

Most lenders will assess your expenses and savings while checking your loan eligibility, checking on factors crucial to home loan approval, such as if your bills are paid on time and what your credit score presently looks like.

Your income can be one of the most critical factors to determine your final approved home loan amount. As such, you’ll need to provide payslip copies to lenders to assist them in assessing your income during the loan tenure, regardless of your employment status, full-time, part-time, or otherwise.

Casual employees will want to be casually employed for at least 12 months to be eligible for a home loan. Alternatively, you want to have worked as a permanent casual worker (working for a fixed number of hours per week) for at least one month, or you should have been in your current job for a minimum of three months (if the hours are irregular) to be eligible for the loan.

While many lenders consider casual employees as high-risk borrowers because of their fluctuating incomes, there are a few specialist lenders, such as NAB, which may provide home loans to individuals employed on a casual basis. A NAB home loan for casual employment is essentially a low doc home loan specifically designed to help casually employed individuals who may be unable to provide standard financial documents. However, since such loans are deemed high risk compared to regular home loans, you could be charged higher rates and receive lower maximum LVRs (Loan to Value Ratio, which is the loan amount you can borrow against the value of the property).

While applying for a home loan as a casual employee, you will likely be asked to demonstrate that you've been working steadily and might need to provide group certificates for the last two years. It is at the lender’s discretion to pick either of the two group certificates and consider that to be your income. If you’ve not had the same job for several years, providing proof of income could be a bit of a challenge for you. In this scenario, some lenders may rely on your year to date (YTD) income, and instead calculate your yearly income from that.

The length of time it will take to pay off your current home loan, based on the currently-entered mortgage balance, monthly repayment and interest rate.

If you’re looking to lock in a return on your business savings, one option is a business term deposit with NAB. The big four bank provides competitive interest rates while giving you the flexibility to choose the term. NAB offers business term deposit interest rates for investments of between $5,000 to $499,999.

NAB doesn’t charge any monthly account or application fees. The interest is calculated daily and for the 90-day term and six months term, you will get paid when the deposit matures. For the 12 months term, you can either choose to get paid monthly, quarterly, half-yearly or annually.

If you wish to withdraw your funds before the deposit matures, you need to give NAB 31 days notice. However, they do make exceptions if you’re experiencing hardship and need the funds immediately. Either way, you may have to bear the prepayment cost, which you can learn more about in the Terms and Conditions.