Banks are offering special deals, including honeymoon interest rates below 2%, to win new business from home buyers, says Sally Tindall, director of research at RateCity.
One lender is offering a variable-rate home loan of 1.99% and more lenders are expected to follow suit, as competition for new mortgages intensifies. Another lender is offering “cashbacks” of up to $4,000 for health, education and emergency services workers.
Reserve Bank figures for May show the average owner-occupier was paying 3.26% interest on their existing home loan while those who applied for a new home loan would pay 2.93% on average.
Many of the best deals are available to new customers who have big deposits, such as those refinancing who have built equity in their properties. Introductory rates typically revert to a higher interest rate after one or two years and could cost the borrower more in the long term unless mortgage holders commit to regularly refinancing their home loan, says Tindall.