A non-bank lender has unrolled an introductory home loan rate of just 1.99%, which now stands as the lowest variable rate within Australia.
However, while the offer from Loans.com.au is undoubtably notable, the loan reverts to an ongoing variable rate of 2.57% (2.55% comparison rate) after the first year.
The lender also announced a two-year discounted variable rate of 2.09% which then reverts to 2.79% ongoing.
Both offers are only available to new customers applying for an owner-occupier loan, paying principal and interest and with a deposit of 20% or more.
According to Sarah Megginson, managing editor of Australian Broker, Your Investment Property and Your Mortgage, it was “only a matter of time” before the market saw more offerings beginning with a one.
"First cab off the rank was Bank of Us, but the catch there was it was only available to Tasmanians,” she said.
“Here we have a more broadly available product and that's really exciting for borrowers, as it shows there is a lot of competition for their business – which means shopping around could help you save thousands of dollars.”
While such a low figure is understandably tempting, Megginson has urged borrowers to look beyond the headline rate – or cashback incentives, offers to waive LMI and the like – to make sure the deal truly works in their favour.
“A low rate is fantastic, but what if their turnaround times have blown out to three months? Or, it might be the case that once you add in package fees, account-keeping fees and other charges, the loan costs you more in the long-run than a mortgage starting with a two,” she explained.
“A comparison rate is a good place to start, but as they're generally pegged to an unrealistically low $150k loan amount, even they are not a clear indication of what the loan will cost a borrower, based on their specific situation.
“Right now, working with a broker is the key to ending up with a product and rate that suits your needs," Megginson concluded.
While Raj Ladher, home loan specialist at YourMortgageBroker, reiterated the need to consider factors beyond the rate alone, he also enthusiastically welcomed the news for its broader market implications.
“With headline interest rates beginning with a three just 12 months ago, it really is great news to hear interest rates as low as 1.99%,” he said.
“Although I can’t see interest rates increasing anytime soon, they certainly aren’t here for good, so now is the time for borrowers to try and get ahead on their mortgage.”