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With financial institutions fighting for new business, new and existing mortgage-holders could get a rate beginning with 1 if they are willing to shop around, an industry expert has advised.
New results collated by Canstar have shown that Homestar Finance has taken home loan interest rates to a new record low by introducing a one-year fixed rate of 1.98 per cent (2.51 per cent comparison rate).
The new fixed rate is available for applications submitted by 30 September and settled by 31 December 2020.
The move comes one month after rates first fell below 2 per cent. Tasmanian customer-owned bank Bank of Us was the first to introduce a fixed rate at 1.99 per cent on 30 June, and loans.com.au introduced a variable rate of 1.99 per cent on 22 July (an intro rate for 12 months).
Speaking of the new lowest rate in the market, Canstar editor-at-large and money expert Effie Zahos said: “We can’t be complacent when it comes to the interest rate we’re paying on our biggest debt, as it can cost us dearly.”
However, property investors are being told to weigh up the fees and charges that may apply when switching to this rate or any new home loan offer. For instance, it has a $495 application fee.
The lower rates also come with the condition that the investor can find the necessary funds themselves. There is no option for a guarantor – be it a family member or not – to assist with the loan deposit or to provide their own security for the loan.
“There’s no denying that this is an impressive rate, but when rates get this low be sure to check if additional fees and charges apply as this can increase the effective rate,” Ms Zahos said.
Ms Zahos said it is important for consumers to continue to look for the best rate, with small changes saving thousands of dollars.
“Keep an eye on the comparison rate as this could be a good indicator of the revert rate. If it is high, then be prepared to refinance again at the end of the fixed term.”
“The cash rate may not be moving, but plenty of lenders are certainly moving home loan rates. Use these headline rates as a benchmark and question your lender for a better deal. If your lender won’t budge and you’re confident you’re a quality customer, then it could be time to walk the talk and move,” Ms Zahos concluded.