Trending Financial News 11 November

More than 100 variable home loans under 3.5%

There are now many more than 100 variable home loan products with comparison rates under 3.5 per cent pa, now listed on InfoChoice’s database of 145 institutions and 1800 home loans.

Most of these are owner-occupier home loan products requiring principal and interest repayments.

However, there are some interest-only loans and investor loans among the low-rate leaders now with rates under 3.5 per cent pa.

For example, FreedomLend has a 3.09 per cent pa comparison rate home loan for investors and a 2.79 per cent pa comparison rate for owner-occupiers.

One bank way in front of term deposit market

Brand new entrant to the banking scene in Australia, Judo Bank, is offering 2.0 per cent pa on 12-month term deposits, 0.2 per cent more than the next highest rate listed on InfoChoice (10/11/19).

Judo Bank is a lender to small and medium business. For retail consumers, Judo bank offers market-leading term deposit rates.

12-month term deposit rates (InfoChoice 10/11/19)

RBA reveals what the bank loyalty tax costs you

Borrowers who ask for a rate discount are getting an average 1.2 percentage points off the advertised rate, according to new data released by the Reserve Bank of Australia.

New borrowers get an extra 0.3 percentage points off the advertised rate said the RBA.

Banks and other lenders typically offer new variable rate home loans at lower interest rates than existing variable rate loans, even for borrowers with the same income and expense details.

“On average, for owner-occupiers with variable rate loans, interest rates on new loans are currently around 30 basis points below those of existing loans,” said the RBA in the latest Statement on Monetary Policy.

How much in rate cuts have the banks passed on?

The Reserve Bank of Australia has cut interest rates by 0.75 percentage points, from 1.50 per cent to 0.75 per cent in three cuts since June 2019.

Now, the Reserve Bank reports that banks have passed on 0.60 percentage points of the 0.75 percentage points in RBA rate cuts since June.

During this period, the big four banks have lost home loan market share to smaller lenders, KPMG reported.

Compare home loan deals from Australia’s banks and other lenders at InfoChoice.

How much can I save by refinancing?

You can reduce your mortgage repayments significantly by comparing rates and deals and being prepared to switch lenders.

“Switching from a loan charging 4.5 per cent to a loan charging 3.5 per cent can reduce your repayments by about fifty thousand dollars over the life of the loan,” said Vadim Taube, CEO of comparison site

According the InfoChoice refinancing calculator, a switch from a 4.5% pa, 25-year, $300,000 home loan to a 3.5 % pa mortgage could reduce monthly repayments by $49,688.02 in total and $160 immediately.

Monthly repayments could come down $165.63, from $1,667.50 to $1,501.87.

Interest-only vs principal and interest? P&I is winning

Over the past two years, the proportion of home loans that require just interest-only repayments has declined from around 40 per cent to 20 per cent.

Interest-only loans typically have higher rates than P&I home loans. The Reserve Bank reports that refinancing activity indicates many borrowers have moved from higher interest-only loans to cheaper P&I loans in the last two years.

“Households obtaining new loans, financing existing loans or negotiating a better deal with the existing lender tend to receive lower rates that existing borrowers who do not alter their original loan arrangements,” said the RBA in the latest Statement on Monetary Policy.

“This reflects strong competition among lenders for high-quality borrowers,” the RBA said.

Up Bank wants to be best in world

Bendigo Bank owned Up Bank is “Australia’s number one fintech by a mile,” according to banking industry newsletter Up Bank “will be bigger than Bendigo before long.”

Up Bank is a mobile phone app-based bank focussed on service improvement. Up pushed 12 app updates in one day this year with five or six per