Diverging data sends mortgage rates on a roller-coaster

A piece of good news for Australia's housing market came on Wednesday which revealed building approvals picked up in May, just as the government's five-year housing goal kicked off on Monday.

In a further bid to boost housing supply, another 50,000 places across the three Home Guarantee Scheme (HGS) were also opened on the first day of the 2025 financial year.

Under the Scheme, eligible home buyers can borrow up to 98% of the property value, with the Federal Government providing participating lenders with a guarantee so borrowers can avoid paying lenders mortgage insurance (LMI).

The announcement was welcomed by the Housing Industry Association (HIA), which recognised that saving for a deposit remains the largest obstacle to getting onto the property market.

"With the current cost pressures on households, a first home buyer is facing years to save a deposit and in that time they risk being priced out of the market," said Simon Croft, HIA chief executive for industry and policy.

Despite the encouraging updates, the looming possibility of a cash rate hike following the hot monthly CPI figures in May continues to hound mortgage holders and aspiring home buyers.

It is said that another 25 basis point hike in the cash rate would take monthly repayments on the current median dwelling value to over $4,000 per month.

"Not only is this further out of reach for prospective buyers, it would likely also represent a further blowout in the premium of holding a mortgage relative to renting," CoreLogic head of research Eliza Owen said.

Although ANZ and NAB have already delayed their rate cut forecasts to February and May, respectively, none of the Big Four banks are seeing near-term cash rate hikes – just yet.

All these new forecasts and datasets feed into the decision-making process of these mortgage lenders' rate-setters.

ME Bank slashes variable mortgage rates

Bank of Queensland's digital banking division ME slashed the variable rates on select package and basic home loan products.

A hefty 93 basis point cut was applied across the bank's Flexible Home Loan Member Package with ≤90% loan-to-value ratio (LVR) paying principal and interest (P&I).

Flexible Home Loan Member Package with loan size between $150,000 and $399,000 now carries a variable rate of 6.59% p.a (6.97% p.a. comparison rate*), while loan amounts starting at $400,000 have 6.49% p.a. interest rate (6.87% p.a. comparison rate*).

ME's package home loan comes with fee-free redraws and an offset account for an annual package fee of $395.

The bank's Basic Home Loan Owner Occupier P&I (LVR ≤90%) likewise carries a lower rate of 6.39% p.a. (6.41% p.a. comparison rate*) following an 85 basis point cut this week.

Loan amount for ME Bank's basic residential mortgage starts at $150,000.

At the same time it also increased an array fixed-rate home loans by 20 basis points. 

Beyond Bank also applies the slasher, but on fixed rates

Beyond Bank went after its fixed home loans, cutting as much as 35 basis points on its owner occupier products.

Following the government's announcement of the new 50k places for HGS, Beyond Bank, one of the Scheme's participating lenders, dropped the rates on its First Home Buyer home loan.

The bank's First Home Buyer Scheme as well as the Total Home Loan on two- and three-year terms now feature the same 5.94% p.a. advertised interest rate.

Details are seen below:

Loan amounts for both mortgage products start at $50,000, and max at $2 million.

Borrowers of the First Home Buyer Scheme can loan up to 95% of the value of the property, while successful applicants in the government's Home Guarantee Scheme can take out up to 98% sans LMI.

The Total Home Loan Package, on the other hand, offers a redraw facility and low rate Visa credit card, all for an annual package fee of $395.

Bank of China increases variable and fixed home loan rates

New customers taking owner occupier or investment home loans with the Bank of China will have to contend with higher rates following this week's adjustments.

A uniform 20 basis point increase was applied across the bank's range of fixed and variable mortgage products.

The lowest variable rate for owner occupiers is available through Discount Plus Home Loan P&I with ≤80% LVR at 6.18% p.a. (6.55% p.a. comparison rate*).

Similarly, the Discount Plus P&I mortgage product offers investors the most competitive variable interest rate at 6.38% p.a. (6.75% p.a. comparison rate*).

The Discount Plus Home Loan for both residents and investors come with a full offset account.

As for fixed rates, changes on P&I products are shown below:

Other movers this week

• Hume Bank ups variable rates by up to 25 basis points
• IMB lowers variable home loan by 10 basis points
• Police Credit Union cuts 1- and 2-year fixed rates by 10 bps, ups 3-year fixed by 20 bps

Read more: Home Loans News Term deposit rate changes

Bernadette Lunas

Finance Journalist

Bernadette is a journalist with years of experience covering topics in macroeconomics, real estate, and lifestyle beats for notable print media organisations. She joined the InfoChoice Group in 2024, bringing her passion for writing stories that help Australians make better decisions about money.

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