Whether you're looking for your first home, purchasing an investment property or just looking for a better interest rate, you'll be looking for a low-interest loan in Australia. But is that loan with the lowest mortgage interest rate in the market right for you?
Before jumping into a low-interest loan, understand what they are, how to find them, what you need to consider and why a low-interest loan isn't always your best option.
Each lender sets its own interest rates; however, they're all guided by the monthly Reserve Bank of Australia's (RBA) cash rate decision. The RBA cash rate is one of the crucial factors determining the interest rate charged to lenders when they borrow funds which they then use to lend to you. This is why the cash rate impacts the interest rates offered by lenders.
The RBA cash rate isn't the only thing that impacts interest rates. Lenders will also work into their calculations other funding costs, as well as their own overhead costs and costs of servicing you as a customer. This is why you'll often find the lowest mortgage interest rates come from online lenders like Yard, as they don't have branches, so they have less overhead or running costs.
Low-interest loans are very attractive, but you still need to consider the whole home loan product, not just the rate, when deciding if it's right for you. However, there are a few things you should consider when looking at low-interest loans.
As attractive as a low-interest loan is, there are some circumstances where you may not want to jump on the lowest mortgage interest rate in the market.
The crucial part of finding a low-interest loan in Australia is making sure that you're comparing like for like. For example, don't compare a fixed-rate loan with a variable rate loan as they aren't the same loan type, so they are unlikely to have exactly the same rate. The same goes for looking at owner-occupier rates and investor rates. You need to make sure when looking for a competitive mortgage interest rate, you're comparing the same loan type.
You may find a lot of advice saying that working with a mortgage broker will help you get a low-interest loan in Australia, which may work for some. But mortgage brokers don't usually work with online lenders or smaller lenders with more competitive rates. Online lenders, in particular, have the benefit of minimal running costs or overheads. This means they can offer some of the most competitive mortgage rates and home loan features in the market.
If you're on the hunt for a low-interest loan, make sure to check out Yard's range of mortgage interest rates.