I wanted to make sure I have one of the cheapest home loans on the market. So I found an online lender with a consistently low interest rate (I should know, I check rates every month). But I also made the sure the loan had an offset account. For me, being able to build up savings in the offset account speeds up my loan and cuts down my overall interest charges dramatically. This makes the loan much cheaper in the long run.— Richard Whitten, Money editor
The number one factor in determining a cheaper home loan is a low interest rate. The lower the interest rate, the cheaper your monthly home loan repayments will be.
Let's compare 2 otherwise identical home loans with slightly different interest rates.*
| Interest rate | 7.26% | 5.99% |
|---|---|---|
| Loan amount | $610,286 | $610,286 |
| Loan term | 30 years | 30 years |
| Monthly repayment | $4,168 | $3,656 |
| Monthly saving | N/A | $512 |
| Annual saving | N/A | $6,144 |
As you can see, with the lower interest rate, you save $512 a month – or $6,144 a year.
*We're using the average owner-occupier home loan size, the average variable rate loan in Finder's database and the lowest rate currently available on Finder.
Every month, we analyse the rates in our database to create a list of the market's cheapest loans.
On 05 December the official cash rate was held at:
4.35%
The lowest owner-occupier loan in Finder’s database is:
5.97%
Assuming the average owner occupier home loan size of $610,286 you would be making monthly repayments of:
$3,581
The average loan amount for a first home buyer reached a record high in October 2023, increasing by 4.1% from the same month the year before. First home buyers borrowed an average loan of $507,488, reflecting how high property prices are affecting those wanting to get onto the property ladder.
It’s understandable then that Australians are feeling pessimistic about the prospect of owning a home. According to Finder’s Consumer Sentiment Tracker (CST) in December, Australians expect it will take them 8 years to own a home. At the start of 2021, the expectation was a more positive 5.5 years.
A year and a half of rising interest rates can’t have helped the situation, either.
Luckily, economists are predicting that rates may begin to fall towards the end of this year: Commonwealth Bank’s economists are predicting as early as September.
Graham Cooke heads up Finder's insights team, which is responsible for conducting data-driven research. He also regularly appears on TV and radio, taking part in more than 500 interviews to discuss financial news and trends.
Right now, variable rate loans are a little lower than fixed rate loans. This is usually the case, but not always. Read more in our guide on the difference between fixed and variable rates.
To find the cheapest home loan, don't stick with the same bank you've used your whole life. Compare lenders big and small, and you'll quickly find there's a big difference between them.
Online lenders, fintechs and small digital banks tend to have cheaper home loan rates than bigger banks. If you're not comparing rates from these lenders, you might miss some of the best deals on the market.
Online lenders are cheap, but it's a myth that the Big Four always have much higher rates. It's a very competitive market. There's often not much difference between a hot online deal and a big bank's lowest variable rate.
Many of the cheapest loans among Finder's partners (and the wider market) are from smaller banks and local credit unions. This is why you really have to compare as many lenders as you can.
The cheapest home loan has the lowest interest rate. But every borrower has different needs. So beyond a low rate, you need to get a loan that actually helps you achieve your property goals and financial needs.
Variable rate home loans typically let you make extra repayments. By paying more off your loan than the required monthly repayments, you get out of debt faster. This means you pay less interest.
Fixed rate loans are less likely to allow extra repayments.
Owner-occupier home loans have the cheapest rates. But they're no good if you're a property investor because you need an investment loan. Make sure you compare loans that match your needs as a borrower.
Most borrowers want a principal-and-interest loan, but for some investors, an interest-only loan offers tax benefits.
Some home loans come with 100% offset accounts. This incredibly useful loan feature is essentially a bank account attached to your mortgage. But instead of earning interest, every dollar in the offset account reduces the interest your lender charges.
You still repay the same amount every month, but by putting money in your offset account, you end up finishing the loan faster. This saves you interest.
If I had to credit just one thing with helping me repay my home loan in just 7 years, I'd say it was an offset account. This is a debt-busting secret weapon. You should keep every cent to your name in one of these – we're talking your savings for everything, your emergency cash stash and even your salary. You'll likely save tens of thousands of dollars and shave years off your time in debt.
Nicole Pedersen-McKinnon
Freelance finance journalist
Most borrowers choose 30-year loan terms. This keeps your monthly repayments as low as possible.
With a shorter loan term, of say, 25 years, your monthly repayments will be higher. But because you get out of debt 5 years sooner, it ends up cheaper in the long run because you pay less interest.
Let's break down 3 examples. These loans are all for the same amount borrowed, but the loan term changes:
| Loan term | 30 years | 25 years | 20 years |
|---|---|---|---|
| Interest rate | 6.00% | 6.00% | 6.00% |
| Loan amount | $600,000 | $600,000 | $600,000 |
| Monthly repayment | $3,598 | $3,866 | $4,299 |
| Total cost* | $1,295,030 | $1,159,743 | $1,031,611 |
*Total cost here refers to the amount of interest you pay over the life of the loan, plus the principal.
As you can see, a longer loan term means cheaper monthly repayments. But a shorter loan means you pay less interest in the long run, making the whole loan cheaper.
Some lenders charge multiple loan fees that can add up to hundreds of dollars. But other lenders charge basically no fees at all (you still have to pay government fees like a mortgage registration fee).
If 2 loans have identical interest rates and features, the one with fewer fees will be the cheapest home loan.
While it's often easier said than done, saving a bigger deposit means borrowing less money. And that instantly makes your home loan cheaper.
It saves you money in other ways too:
How to accurately estimate the cost of building your own house.
Chris Gray takes us through four things people get wrong when buying property.
Auction expert Damien Cooley gives the lowdown on why property auctions are the best way to sell right now.
Richard Holden from UNSW Business School delves into Australian home loan sizes and rate cuts
We can't make clear predictions about Sydney's property market, but here's what the data suggests.
If you're buying a home from your parents below market value, there are a few details you need to know to make sure you're getting a good deal.
There's profit to be made in renovating your home, but don't jeopardise your insurance when you do.
If you’re having trouble securing a home loan through traditional means, there are some government programs that might help you achieve your property goals.
Australians are now drinking less than we previously were. Find out how you could save $40,000 by simply not drinking alcohol.
Also known as a repayment holiday, a mortgage holiday is when you don't have to make payments for a short period.
Sign up for our FREE 8-week course to get on the property ladder.
Get a home loan with a low deposit.
Pay less for your home loan with a super-low interest rate.
Save on your investment loan with these hot offers.
Hi. I just wanted to know is there any reason why Reduce home loans are no longer on your home loan comparison site ?
Hi Dash,
You can compare rates from Reduce home loans on this page.
I hope this helps.
Kind regards,
Richard
how can I get lown
Hi Hugo,
You can apply for one of the loans on this page by clicking the green button that says ‘Go to site’. Once you arrive at the lender’s site, you should have all the information you need to apply.
Cheers,
Sarah
I have a house that is located in Perth WA and the mortgage is fixed for 2 more years. I would like to change to a lender that is offering less than 3% as the fixed rate of 4.5% can you advise me the safest way to go? mortgage is approximately $160,000 on a 3 year old new home 4 x 2
Hi Rix,
Thanks for getting in touch!
You may refer to our complete guide to refinancing your home loan to know how to get started. You can also refer to our list of refinancing home loans to compare your options. Our table should allow you to compare the features and benefits of each loan provider such as max loan rate, interest and etc. This way it will be easier for you to see which provider fits you best. Banks like HUME, Virgin, and Ubank offer interest rates of less than 3%. If you need further help, a quick guide on how to compare home loans is also stated on the page.
A mortgage broker is the best person to reach out to see your options for refinancing. They can give you a multitude of options according to your situation. In the meantime, to give you an idea of how your monthly repayments will go, you may use our home loan calculator.
As a friendly reminder, carefully review the eligibility criteria of the loan before applying to increase your chances of approval. Read up on the terms and conditions and product disclosure statement and contact the bank should you need any clarifications about the policy.
Hope this helps and feel free to reach out to us again for further assistance.
Best,
Nikki
I have been looking into refinancing my property, but as it’s an acreage (60 ha), no lenders seem to be interested in me.
Hi Ian,
Thank you for getting in touch with Finder.
There are lenders from our rural or hobby farm home loans guide. You can compare your options using our comparison table. When you are ready, press the ‘Go to site’ button to apply. You can also seek professional help from a mortgage broker since you’re having a hard time finding the right bank/lender.
Before applying, please ensure that you meet all the eligibility criteria and read through the details of the needed requirements as well as the relevant Product Disclosure Statements/Terms and Conditions when comparing your options before making a decision on whether it is right for you. You can also contact the provider if you have specific questions.
I hope this helps.
Thank you and have a wonderful day!
Cheers,
Jeni
I have just paid off my house worth approx $800-850k. I am looking at ways besides dying to assist my two children into getting into a property. Can you expand on the family pledge home loan as they both have not got a deposit or another product in which I can assist with them getting into the property market?
Thanks.
Hi Keith,
Thank you for getting in touch with Finder.
You can assist your kids to get a deposit together. For example, the child saves 5% or 10% of a property’s value, and the parent can use the equity in their house to cover the other 10-15%. The child pays back the whole loan (including the amount guaranteed by the parent). Once the parent’s part of the deposit is repaid by the child, the parent/guarantor is usually free from any other debt even if the child can’t repay the rest. But the big risk is if the child can’t repay the loan (including deposit) the parent/guarantor may have to repay it.
Please refer to our guarantor home loans guide for more details and to compare your options.
I hope this helps.
Thank you and have a wonderful day!
Cheers,
Jeni