Think you have a great home loan deal? Chances are, you’ve been screwed!

Even if you took out a mortgage just over two years ago, you may no longer be on a competitive rate.

Our analysis of the most competitive home loan interest rates from our panel of almost 40 lenders shows that the best interest rates are not always publicised.

That’s because banks don’t always advertise their best or lowest home loan interest rates. Just take a look at these great rates.

Are these Australia’s cheapest home loan interest rates?

^*WARNING: This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Each comparison rate is calculated based on $150,000 over 25 years for a secured loan.

For more rates and offers on different mortgages including specialist loans, please go through the interest rates page.

How can banks screw people on interest rates?

Banks have different ways of messing with people’s rates. You may be paying a higher interest rate without even realising it.

One of the ways they do this is by jacking up their standard variable rate.

Before the Global Financial Crisis (GFC), standard variable rates and lender discounts were mostly all the same. You’d consider it pretty good to get a 0.7% discount.

Now, the banks have either raised their standard variable rates or haven’t passed on the RBA rate cuts. However, discounts offered to new clients have increased up to as much as 1.3%.

This means loyal clients may be paying as much as 0.6% more than new clients.

To put it in perspective, a 0.6% difference in rate would mean paying an extra $63,979.22 in interest over 30 years on a $500,000 loan.

You pay higher interest rate if you have a small deposit

Since the GFC, banks have become more conservative when lending 90% Loan to Value Ratio (LVR) or more.

If you have a small deposit, you’ll have to meet stricter lending criteria and will likely have a higher rate as well.

However, banks may not drop your rate when you’ve paid down your loan or house prices rise. Even if you’re not a high risk borrower anymore, your rate may still be high.

This wouldn’t be a fair deal because you would have paid Lenders Mortgage Insurance (LMI) to cover the bank anyway.

Loyalty to lenders doesn’t always pay

Another way they can screw people over is when clients ask for a bigger discount. If you see what the bank is up to and you threaten to leave, they will look at your profile in their system.

They have methods of predicting who will refinance and who won’t.

Basically, if their system says that you’re loyal then they may refuse to give you better pricing. Even if they agree, you may get an additional discount of just 0.05% to 0.20%.

You could lose your discount when your fixed rate expires

You may get a good discount on the variable rate portion of a half-fixed, half-variable home loan. After the fixed rate expires, the Bank Standard Variable Rate (BSVR) is applicable.

However, the same discount may not apply for the portion that was fixed. This is because banks often put that part of the home loan on a lower discount than the other half. It’s no surprise that it often goes unnoticed.

In some cases, banks have charged the BSVR as much as 1.3% higher than the other half of the loan.

Your could lose your professional package benefits

Large home loans are generally under a professional package. This costs an annual fee of around $350 to $400. In return, the customer gets a discounted rate and waived fees on a range of bank products such as credit cards and transaction accounts.

However, if you don’t have enough funds in your account when the package fee is charged, your discounts are cancelled. This means your loan will revert to the BSVR!

Customers often don’t notice this sneaky trick. They get overcharged until they review their home loan interest rates and fix the problem.

How can you avoid getting played by the banks?

If you’re paying a rate higher than what the bank is offering new clients, you can request a discount on your home loan interest rates.

Unfortunately, you may get a discount that may not be close to what the new clients get. In cases like this, where the bank doesn’t want to help, you can refinance to another lender.

Most people refinance every three to seven years just to make sure that their rate is competitive.

We’re credit specialists and have relationships with almost 40 lenders. We can help improve your chances on bigger discounts and find the right lender for you.

Call us on 1300 889 743 or complete our free online assessment form to learn how we can help you with your home loan.

You don’t have to pay higher interest rate as an investor

The Australian Prudential Regulation Authority (APRA) set a cap on how much the banks could lend to investors. This resulted in banks having to tighten their lending policy for investors and raise their interest rates.

However, they didn’t do it all in the same way. Consistency in terms of interest rate is difficult to find. Some lenders charge more for one product while others charge more for another.

If you’re planning on getting finance for investing, there are lenders that will give amazing investment loan discounts if you also have your home loan with them.

If that’s not an option then you’ll need to go with a lender that still has competitive pricing for investors. This means you’ll have to shop around thoroughly. A mortgage broker can help you with this.

You can avoid being overcharged

You may come to realise that you’re paying more than you need to. To avoid this, the key is to regularly review your interest rate.

If your home loan is over two years old, it’s time to consider refinancing. Some of the pricing on old home loans, particularly investment loans, aren’t competitive at all.

Also, if you’ve paid off your home loan to below $150,000, you should consider switching from a professional package to a basic home loan. This is because you’ll often be paying more in the annual fee of the professional package than saving through its rate discount.

What’s more important to check: rate or cost?

Although home loan interest rates are important, you also need to consider the cost of the mortgage.

Most people focus only on the rates because they don’t know what else to focus on. However, there’s more to it than that.

The cost of LMI varies between lenders. This means that even if one lender offers a lower interest rate, they may have a higher LMI.

You can use the LMI calculator to see how LMI and interest rates vary among different lenders.

For example, using the calculator we find that for a $500,000 loan on a $595,000 property, you may have to pay up to $5,247 in LMI with a lender that offers an interest rate of 4.44%.

However, we find another lender offers a higher interest rate of 4.67% but is willing to waive the LMI. Not only that, their comparison rate of 4.67% is lower than the other’s 4.73%.

By choosing the right lender and considering LMI as well as the comparison rate, you can save thousands of dollars over the term of your home loan.

It’s actually about achieving your goal

You can find a lot of discounted home loan interest rates that have catches. Some banks may be in the process of raising their rates but don’t advertise it until later.

Lenders may not even have competitive fixed rates. People come to them for a variable rate home loan but then fix later without shopping around and the bank cleans up.

If you want to buy a house but you apply with a lender that has a special discount but slow service then often you’ll miss out on the house as someone else gets a faster approval.

This is the reason why the second cheapest lender or the cheapest reputable lender is often the better choice.

Some lenders may also allow you to have a larger loan size or a smaller deposit, buy in a remote location or inner city apartment, or fund your business.

In other words, the rate may be cheaper but the cost to you and your family can be higher. A home loan should be compared based on how well it helps you achieve your goal.

How can we help?

Our mortgage broker have in-depth knowledge of LMI providers and their guidelines. They also know who offer the best home loan interest rates and deals.

We review the interest rates and loan situation of our clients once a year. We can help you qualify for a low interest rate even if you have bad credit or refinance to a better deal if you’re being overcharged.

Call us on 1300 889 743 or complete our free online assessment form to find out if you qualify.