How can I tell if my home loan rate is competitive?
Start by identifying exactly what you're comparing.
Look at:
- your current interest rate
- whether the loan is variable or fixed
- owner-occupied or investment purpose
- principal-and-interest or interest-only repayments
- your current loan balance
- estimated property value
- loan-to-value ratio
- annual or package fees
- offset or redraw features
- remaining loan term
Compare like with like
Then compare your loan with genuinely comparable alternatives.
For example, comparing an owner-occupied principal-and-interest loan with an investment interest-only loan won't necessarily tell you whether your existing rate is competitive.
Compare your rate with current Australian lending data
The Reserve Bank of Australia publishes housing lending-rate statistics covering rates on new and outstanding housing loans. ASIC's Moneysmart also provides home-loan comparison information and calculators using Australian lending data.
These can provide useful market context. However, an average rate is not automatically the rate you personally qualify for — your circumstances and the lender's credit criteria still matter.
Because lender pricing changes over time, treat published figures as a snapshot of the period they relate to rather than a permanent benchmark, and check the source for the current data.
Why might someone else have a lower home loan rate than me?
Two borrowers with mortgages of similar sizes can have different interest rates. Possible reasons include:
Loan purpose
Owner-occupied and investment lending can be priced differently.
Repayment type
Principal-and-interest and interest-only loans can have different pricing.
Loan-to-value ratio
The amount borrowed relative to the property's value can influence the products and pricing available.
Loan features
Loans with offset accounts, packages or other features may have different rates and fees from more basic products.
Lender pricing
Different lenders can price similar lending differently.
Your overall lending position
Loan size, equity, credit profile, income position and other factors may affect the options available.
This is why comparing only the headline interest rate can be misleading.
Your lender may not automatically give you its most competitive rate
Mortgage pricing can change over time. New products may be introduced, lender pricing can change and your own position may be different from when you originally took out the loan.
That makes it worth reviewing your mortgage periodically. If you discover that comparable loans are priced differently, one possible first step is simply asking your existing lender whether they can review your rate.
You don't necessarily need to refinance immediately. Your existing lender may be willing to reconsider its pricing.
A small rate difference can matter
Home loans are usually large debts held over long periods. Because of this, even a relatively small difference in interest rate can affect repayments and total interest over time.
But the interest rate should still not be considered in isolation. A loan with a lower rate could have:
- different fees
- fewer useful features
- a different repayment structure
- switching costs
- a longer proposed term
- other conditions that affect the overall outcome
Example: why reviewing your rate matters
Consider a homeowner with a substantial mortgage balance who has remained with the same lender for several years. During that period:
- the lender's pricing may have changed
- competing products may have changed
- the property's value may have changed
- the borrower's equity may have increased
- the borrower's circumstances may have changed
What that means
That doesn't automatically mean they should refinance. But it does mean the mortgage they originally selected may no longer be the most suitable or competitive option available to them.
A home loan shouldn't necessarily be treated as something you set once and never review again.
Should I ask my bank for a lower rate?
It can be worth asking. Before moving lenders, contact your existing lender and ask whether they can review the pricing on your loan.
You can then compare what they offer against relevant alternatives. If your lender improves the rate sufficiently, you may decide that moving isn't necessary. If they don't, you can investigate whether refinancing makes sense.
Should I refinance just because another lender has a lower rate?
Not necessarily. A refinance comparison should consider:
- your current balance
- existing rate
- proposed rate
- remaining loan term
- proposed new loan term
- discharge and switching costs
- potential break costs
- loan features
- your borrowing capacity
- your objectives
The overall position matters more than the number
A lower advertised rate can be attractive, but changing lenders should improve the overall position rather than simply produce a different interest rate.
Could my rate be competitive but my loan still be wrong for me?
Yes. Interest rate is only one part of a home loan. Your structure may still deserve review if:
- you need an offset account but don't have one
- you're paying for features you don't use
- the repayment structure no longer suits you
- you have multiple loans that could potentially be structured differently
- your investment or financial objectives have changed
- your fixed-rate period is ending
- your circumstances have materially changed
Rate and structure are separate questions
A competitive rate doesn't automatically mean the overall structure is suitable.
What about fixed home loan rates?
Fixed and variable rates should not be compared as though they are identical products. A fixed rate provides certainty over the agreed fixed period but may also have restrictions and potential break costs.
If you're currently fixed, understand the implications of leaving the loan before the fixed period ends. Breaking a fixed loan purely because another advertised rate appears lower may not improve your position.
Does a lower rate mean I'll qualify for the loan?
No. An advertised interest rate and credit approval are separate issues. Refinancing involves a new credit assessment.
Lenders may assess matters including income, expenses, existing debts, credit limits, dependants, property value and the proposed lending structure. Australian Prudential Regulation Authority requirements also influence how regulated lenders assess residential mortgage serviceability.
The fact that another lender advertises a lower rate does not mean every borrower will qualify for that product or pricing.
How often should I check my home loan rate?
There is no single review frequency that is appropriate for everyone. However, it may be worth reviewing your loan when:
- you haven't checked it for some time
- interest rates or lender pricing have changed materially
- your fixed-rate period is ending
- your property value or equity position has changed
- your income or financial position has changed
- you're planning another property purchase
- you're considering accessing equity
- your current loan features no longer suit you
The purpose of a review
The purpose of a review isn't to refinance every time. It's to determine whether your existing lending still makes sense.
A better question than “Is my rate too high?”
Instead of asking only whether your interest rate is too high, consider asking whether your current home loan is still competitive and suitable for what you're trying to achieve. That creates a much more useful comparison.
Your rate matters. But so do your fees, loan term, features, structure, equity position and future plans.
Sometimes the result will be that refinancing makes sense. Sometimes your existing lender may improve your pricing. And sometimes the review will show that your current loan remains appropriate. Knowing which position you're in is the valuable part.
Frequently asked questions
What is a good home loan interest rate in Australia?
There isn't one rate that is appropriate for every borrower. Rates can vary based on loan purpose, repayment type, loan-to-value ratio, loan features, lender pricing and borrower circumstances. Current RBA housing lending-rate data can provide useful market context, but your individual options may differ.
How do I know what interest rate other borrowers are paying?
The Reserve Bank of Australia publishes average interest rates for different categories of housing lending. These averages provide market context but do not represent a guaranteed rate available to an individual borrower.
Can I negotiate my mortgage rate with my bank?
You can ask your existing lender to review your home loan pricing. Whether they change the rate and by how much will depend on the lender and your circumstances.
Should I change banks for a 0.25% lower rate?
Not automatically. The potential interest saving should be considered alongside switching costs, loan term, fees, features and the overall lending structure.
Does having more equity help me get a better interest rate?
Loan-to-value ratio can influence the products and pricing available from some lenders. However, pricing policies vary, so increased equity does not guarantee a particular rate.
Is the lowest advertised home loan rate always the best loan?
No. Consider the comparison rate where relevant, fees, features, loan structure, eligibility requirements and whether the product suits your circumstances.
Can a mortgage broker check whether my rate is competitive?
A mortgage broker can review your existing lending and compare it with options available through the lenders on the broker's panel, subject to your circumstances and lender eligibility requirements.
General information only. This information does not take into account your objectives, financial situation or needs. Lending criteria, fees, rates, products and eligibility vary between lenders and may change. Credit is subject to lender approval and applicable lending criteria.