Number of lenders offering rates below 5.75% has fallen from 10 to four in a single week
The pool of competitive home loan rates available to Australian borrowers has narrowed sharply, with market data pointing to broad upward pressure on both variable and fixed rates ahead of the Reserve Bank of Australia's next cash rate decision.
As of 31 May, only four lenders on Canstar's database had at least one home loan rate below 5.75%: Horizon Bank, LCU, MOVE Bank, and Pacific Mortgage Group. LCU held the lowest variable rate at 5.69% — its Simple Home Loan product — with a comparison rate of 5.71%. Horizon Bank and Pacific Mortgage Group each offered owner-occupier principal-and-interest variable rates of 5.74%.
Between 25 and 31 May, four lenders — Hume Bank, Police Credit Union, Qantas, and Unloan — raised 23 owner-occupier and investor variable rates by an average of 0.22%. Beyond Bank was the sole lender to cut variable rates, reducing two rates by an average of 0.10%.
Fixed rates also moved higher over the same period. Five lenders — Auswide Bank, IMB, MyState Bank, NAB, and Summerland Bank — increased 65 owner-occupier and investor fixed rates by an average of 0.13%.
| Lowest variable home loan rates for owner-occupiers | ||||
| Provider | Loan | Max LVR | Interest rate | Comparison rate |
|---|---|---|---|---|
| LCU | Simple Home Loan | 95% | 5.69% | 5.71% |
| Horizon Bank | First Home Buyer Loan P&I <70% | 70% | 5.74% | 5.74% |
| Pacific Mortgage Group | Variable P&I <60% | 60% | 5.74% | 5.74% |
| G&C Mutual Bank | Essential Worker Variable | 95% | 5.80% | 5.85% |
| Unity Bank | Essential Worker Variable | 95% | 5.80% | 5.85% |
| Virgin Money | Residential Lite Home Loan Variable P&I <80% >150k | 80% | 5.84% | 5.86% |
| Police Bank | First Home Loan P&I 80-98% | 98% | 5.84% | 5.91% |
| Source: Canstar.com.au | ||||
For owner-occupiers on a principal-and-interest variable loan, the average rate now stands at 6.65%, based on a $600,000 loan at an 80% loan-to-value ratio. Average fixed rates for the same borrower profile range from 6.49% for a one-year term to 6.74% for a five-year term.
"Two weeks out from the next cash rate decision, the fixed rate market has largely settled down with just five lenders hiking at least one fixed rate last week," said Sally Tindall (pictured right), data insights director at Canstar.com.au.
"NAB might be in this list, however, Australia's third largest lender made relatively minor tweaks, instead of a mass recalibration, in a move that mirrors the current sentiment for the future of the cash rate. There could be further hikes, but the RBA is unlikely to be making this decision in the immediate future.
"When it comes to the lowest fixed rate in the market, it's now a game of last person, or rather, lender, standing with just two credit unions still offering a fixed rate under 6%: Transport Mutual and Northern Inland. In a market where the vast majority of fixed rates now sit firmly in the 6's and 7's, both might not last the week."
Tindall also noted that the cost of switching loans has risen, citing RBA data showing home loan bank fees increased 17% in the last financial year compared with the prior year.
"Just remember, in most cases, fees aren't like death and taxes," she said. "Often, they can be negotiated."
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