Mortgage rates in Australia
Here are some important terms you will encounter that are related to the mortgage rate and repayments on a home loan:
- Fixed mortgage rate- If you have a fixed-rate loan, the repayments on your loan will be fixed for an agreed term, generally less than five years. This means that your repayments will not be affected by changes in official interest rates or your lender's variable rate. This is a good thing, but the downside is, you will not be able to take advantage of lower interest rates.
- Variable mortgage rate- The interest rate is subject to change throughout the loan term at your lender's discretion. Because the interest rate varies, there may be months when you’ll pay lower repayments, but there may also be months when you’ll pay more when interest rates increase.
- Split mortgage rate- This lets you benefit from both fixed and variable rates. How does it work? A percentage of your mortgage comes with a fixed rate, enabling you to have relatively-stable repayments, while the rest has a variable rate, so if the mortgage rate declines you'll have lower repayments. You will also be able to make extra loan repayments, unlike a fixed rate mortgage.
- Lenders Mortgage Insurance (LMI)- This enables borrowers to purchase a house without providing the 20% deposit that is usually required by banks and financial institutions. Unfortunately, the cost of LMI is significant, running into thousands of dollars.
- Home loan deposit- This is your contribution to the price of the property. This plays a role in the kind of loan that you can get as well as the amount of home loan.
- Regular lump sum repayments- Making a lump sum repayment lowers the amount owed on your mortgage.
What is the Average Mortgage Rate in Australia?
Mortgage rates vary, depending on the factors mentioned and the lenders.