Canstar reveals top rated lenders for investors

One of the biggest changes for investors has been the repricing of investment home loans, in response to the removal of the interest-only investment lending caps from January 2019 and the continuing slowdown in demand, according to Canstar.

Since September 2018, 47% of the lenders on Canstar’s database have decreased one or more of their investment interest-only offerings across fixed or variable rate loans.

The average interest rate for interest-only has come down across variable, one-year fixed, two-year fixed, three-year fixed and five-year fixed by up to 0.08%.

“What’s interesting is while we’re seeing the average investor home loan rates decrease, the lowest offer in the market is where the greatest movement has happened over the last six months with decreases of up to 0.20% on fixed loans,” Mickenbecker adds.

When comparing the average one-year fixed interest only loan amount of $400,000, the average decrease could mean a saving of up to $253 per year. Looking at the market minimum the rate cuts could mean a potential annual saving of up to $518 for investment property owners.

On the reverse side, the majority of increases for investment lending that occurred since September 2018 have been on variable rate loans, with an average increase of 0.15%, meaning that investors are paying higher rates for their existing loans.

While that market has observed more increases on variable rate investment loans than fixed, there has still been a 0.01% reduction on the average variable rate for new borrowers. The reduction has resulted from a number of large downward movements with the average decrease being 0.25%.

Mickenbecker says with great deals out there for new loans it’s a good time for investors, and homeowners for that matter, to check their rate, fees and loan features to see if they could be getting a better deal.

With lenders’ home and investment loan interest rates on the move in both directions, Australia’s biggest financial comparison website, Canstar, released its latest Home Loan Star Ratings research.

Canstar considered more than 4,800 home loans finding that on average a 5-Star Rated home or investment loan had access to lower interest rates compared to the market average.

Canstar’s finance expert, Steve Mickenbecker says it’s not hard to see how borrowers may be left confused as to whether they’re getting a good deal or should look to refinance their home loan.

While the latest Australian Bureau of Statistics figures show a 17.1% year-on-year decline in value for new lending commitments to owner occupiers compared with a 28.6% decline in value for lending commitment for investment dwellings, the door is still wide open for investors, he said.

Canstar has awarded a 5-Star Rating to 26 home loan lenders after they were found to offer outstanding value.

Owner-Occupier Home Loan Star Ratings

Outstanding Value – Home Lender

This award goes to home loan lenders that provided outstanding value products to owner-occupiers across variable and fixed-rate loan terms considered in these ratings. Home loans were assessed across four loan amounts ranging from $200,000 up to $750,000, for borrowers making principal and interest repayments. Here are the winners, listed in alphabetical order:

• Bank Australia
• Freedom Lend
• Greater Bank
• Heritage Bank
• Homestar Finance
• HSBC
• ING
• Qudos BanK
• RACQ Bank

The new Canstar research found owner-occupiers with a 5-Star Rated home loan had access to lower interest rates compared to the market average.

Outstanding Value – Variable Home Lender

This award recognises lenders that consistently offered outstanding value products to owner- occupiers across varying loan amounts. Home loans were assessed across four loan amounts ranging from $200,000 up to $750,000 for borrowers making principal and interest repayments. Here are the winners, listed in alphabetical order:

• AMO Group
• Easy Street Financial Services
• Freedom Lend
• Homestar Finance
• HSBC
• MOVE Bank
• Pacific Mortgage Group
• Reduce Home Loans
• SCU

The research shows owner-occupiers who choose a 5-Star Rated home loan have the potential to save themselves thousands of dollars over the life of the loan. For instance, the average variable interest rate for a 5-Star Rated residential loan valued at $350,000 with an 80% loan-to-value ratio (LVR) and principal and interest repayments was 3.68%. This compares favourably to the marketaverage of 4.47% out of all products on Canstar’s database. Over a 25-year loan term, that difference could equate to more than $50,000 in savings on the total cost of the loan.

Outstanding Value – Fixed Home Lender

This award recognises home loan lenders that consistently provided outstanding value products to owner-occupiers across one, two, three and five-year fixed rate loan terms. Home loans were assessed across four loan amounts ranging from $200,000 up to $750,000 for borrowers making principal and interest repayments. Here are the winners, listed in alphabetical order:

• BankVic
• Freedom Lend
• Greater Bank
• ING
• Newcastle Permanent
• Qudos Bank
• RACQ Bank
• TicToc Home Loans
• UBank

Borrowers looking to fix their home loan for a set period may want to consider the difference in interest rates between a 5-Star Rated loan and the market average. For example, the average 5-Star three-year fixed interest rate for a residential loan valued at $350,000 with an 80% LVR and principal and interest repayments was 3.83%, compared to the average from our database of 4.19%.

Investment Home Loan Star Ratings

Outstanding Value – Investment Home Lender

This award acknowledges lenders that consistently offered outstanding value products to investors across the variable and fixed-rate loan terms considered in these ratings. Home loans were assessed across four loan amounts ranging from $200,000 up to $750,000 for borrowers making principal and interest and interest-only repayments. Here are the winners, listed in alphabetical order:

• Freedom Lend
• Greater Bank
• Homestar Finance
• loans.com.au
• Newcastle Permanent
• RACQ Bank
• TicToc Home Loans
• Virgin Money
• Reduce Home Loans
• Suncorp Bank

The research revealed 5-Star Rated home loans offer investors lower interest rates when compared to the market average within the investor home lender profile.

Outstanding Value – Investment Variable Home Lender

This award goes to home loan providers that consistently offer outstanding value products to investors across variable loans. Home loans were assessed across four loan amounts ranging from $200,000 up to $750,000 for borrowers making principal and interest and interest-only repayments. Here are the winners, listed in alphabetical order:

• Freedom Lend
• Gateway Bank
• Homestar Finance
• loans.com.au
• Newcastle Permanent
• Pacific Mortgage Group
• RACQ Bank
• Reduce Home Loans
• State Custodians
• Community First Credit Union

The research revealed there were potential savings to be found for investors if they chose a 5-Star Rated home loan. For instance, the average 5-Star variable interest rate for an investment loan valued at $350,000 with an 80% LVR and principal and interest repayments was 4.25%, while the interest-only rate was 3.98%. These average rates compare favourably to the market averages from our database of 5.08% and 4.77%, respectively. These differences can potentially add up to be quite significant over time. For example, over a 25-year loan term, that difference means investors making principal and interest repayments could save more than $51,000 on the total cost of the loan.

Outstanding Value – Investment Fixed Home Lender

This award recognised lenders that consistently provided outstanding product offerings to investors across one, two, three and five-year fixed rate loan terms. Home loans were assessed across four loan amounts ranging from $200,000 up to $750,000 for borrowers making principal and interest and interest-only repayments. Here are the winners, listed in alphabetical order:

• Aussie
• Freedom Lend
• Greater Bank
• Newcastle Permanent
• RACQ Bank
• Suncorp Bank
• TicToc Home Loans
• Virgin Money

For borrowers looking to fix their investment home loan, the difference in interest rates between a 5- Star Rated loan and the market average can be significant. For instance, the average 5-Star three- year fixed interest rate for an investment loan valued at $350,000 with an 80% LVR and principal and interest repayments was 4.01%, while the interest-only rate was 4.11%, compared to averages from our database of 4.32% and 4.53% respectively.

Line of Credit Star Ratings

Outstanding Value – Line of Credit

Canstar’s Research team compared the price and features of 48 lending institutions that provided a line of credit secured by a property. Here are the winners, listed in alphabetical order:

• Aussie
• BankVic
• Suncorp Bank
• State Custodians