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The nation’s home loan rate war has intensified with one lender now offering up the lowest two-year fixed interest rate in the market.

Australia’s mortgage rate war has intensified with a small lender offering the lowest two-year fixed rate on the market.

Homestar Finance has slashed its two-year fixed owner-occupier rate by 14 basis points to a market-leading 1.74 per cent, bumping Westpac from the top position after it offered the lowest rate of the big four banks last week.

RateCity research director Sally Tindall said the increase in competition was a win for home loan lenders.

“This loan is the lowest two-year fixed rate on the market and also the lowest overall home loan rate available nationally,” Ms Tindall said.

“It also has one of the most competitive revert rates at 2.24 per cent.”

RateCity research director Sally Tindall says the increase in competition is a win for home loan lenders. Source:Supplied

Fixed rates have continued to fall after the onset of the coronavirus pandemic, which has cheapened the cost of debt.

Federal and state policies such as HomeBuilder in combination with the lower rates are fuelling a significant demand for home buying.

Falling home loan rates come despite the Reserve Bank not moving the official cash rate since November. The central bank has pledged to keep the rate at 0.1 per cent while inflation is below its target range.

According to RateCity, a mortgage owner on the Homestar rate with a loan balance of $400,000, would pay $2832 less in interest compared to the market’s average two-year fixed rate.

In the past two months, 450 fixed rates have been cut across the home lending market.

Ms Tindall said the nation’s largest lender, the Commonwealth Bank, was yet to move on rates this year.

“CBA is the only big bank not to cut any fixed home loan rates this year.” she said.

Homestar has bumped Westpac from the top position in offering the lowest two-year fixed rates. Picture: NCA NewsWire/David Geraghty Source:News Corp Australia

“The pressure’s now on Australia’s biggest bank to rethink its rates or risk losing customers to the others.”

Homestar’s low rate has a loan-to-value ratio (LVR) of 80 per cent, meaning a 20 per cent equity deposit is needed to acquire the loan without needing to acquire lenders’ mortgage insurance.

The small lender is also tied first for the lowest variable rate with Reduce Home Loans at 1.79 per cent

Greater Bank holds the position of lowest rate in the market with its one-year fixed sitting at 1.69 per cent, but is only available to customers in New South Wales, Queensland and the Australian Capital Territory.

NAB’s digital subsidiary UBank is offering the lowest three-year fixed at 1.75 per cent, while the Westpac group has the lowest four-year fixed rate at 1.89 per cent.


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