Market-leading fixed home loan rate unveiled: 4.99% p.a. 

It’s official: for the first time in a long while, home loan interest rates have dipped below 5.00% p.a.

Or, at least that of one mortgage product has.

SWS Bank advertises home loan interest rate below 5.00% p.a.

SWS Bank, a small player based in Young, NSW, has shaken up the market with a special rate of 4.99% p.a. (6.15% p.a. comparison rate*) on its Premium Three Year Fixed Rate Home Loan – far below the national average for similar fixed rate home loans.

The typical one-to-three year fixed rate for new owner-occupier mortgages was 6.09% p.a. in July, as per Reserve Bank of Australia (RBA) data.

SWS Bank's market-leading rate is available to both owner-occupiers and investors borrowing between $800,000 and $2.5 million (6.36% p.a. comparison rate* for investors). 

The product allows borrowers to make $20,000 of extra repayments per year without penalty.

Its interest rate will revert to the bank's Standard Variable Reference rate, currently 6.60% p.a. for owner-occupiers and 6.90% p.a. for investors, on the expiry of the fixed rate period.

Here's the difference a rate of 4.99% p.a. could have on the monthly repayments on a $800,000, 30-year home loan, compared to a rate of 6.09% p.a.:

Interest rate	Monthly repayments
4.99% p.a.	$4,290
6.09% p.a.	$4,843

Figures calculated using Your Mortgage's home loan repayment calculator

For comparison, the lowest home loan interest rate on offer from the big four banks right now is 5.89% p.a.

That's promised by both Westpac (on two-to-five year fixed rate home loans for owner-occupiers with loan-to-value ratios (LVRs) of 70% or less) and CommBank (on three year fixed rate home loans for owner-occupiers turning to the bank's Wealth Package).

Smaller lenders advertising more competitive rates than big four: Expert

SWS Bank's new rate blitzes the big four bank's offerings despite the credit union's comparatively minuscule size.

As of July, SWS Bank's book held $132 million of owner-occupied home loans and $26 million of investment mortgages - a tiny fraction of Australia's $1.5 trillion owner-occupied and $711 billion investment mortgage markets, according to APRA data.

It's a similar story over at Geelong Bank, as the Victorian credit union advertises a special one year fixed rate of 5.50% p.a. (6.99% p.a. comparison rate*) to eligible borrowers.

When it comes to variable home loan interest rates, non-bank lenders Reduce Home Loans and Tiimely Home, as well as mutual banks Macquarie Credit Union, Summerland Bank, and Bank Australia, advertise rates of between 5.74% p.a. and 5.94% p.a.

That's compared to the typical variable rate on a new home loan signed in July - 6.28% p.a.

"Many people are not aware, but smaller lenders are actually offering the best mix of interest rates at the moment," Finch Financial founder Julian Finch said.

"The larger lenders, like CommBank, are promoting some of the highest interest rates in the country and, incredibly, they also hold the largest slice of the home loan market.

"This means a lot of people are paying too much money for their home loans."

Even some of the bigger 'small' banks appear to be outperforming the big four on interest rates right now.

Bendigo Bank, ING, and Macquarie Bank advertise variable rates between 6.01% and 6.14% p.a., and the lending expert believes a slither could be wiped from those in negotiations.

Out of the variable lineup of the big four banks, only CommBank's Digi Home Loan and ANZ's app-based ANZ Plus Home Loan come close to such rates.

They offer respective rates of 6.15% p.a. (6.28% p.a. comparison rate*) and 6.14% p.a. (6.15% p.a. comparison rate*) but are only available to eligible direct-to-bank refinancers.

"Small lenders tend to offer special deals or discounts to compete with larger institutions, providing borrowers with better value," Mr Finch said.

"Even a slight reduction in interest rates can result in substantial savings over the life of a loan.

"Smaller lenders offering lower rates can save borrowers thousands of dollars in interest payments over the term of the mortgage."

SWS Bank was contacted for this article but didn't respond in time for publication.

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