UBank has cut a variety of 'Flex' home loans by between 5 and 10 basis points for owner occupiers and investors.
For owner occupiers, the lowest variable rate at the bank is now 6.09% p.a. (6.33% p.a. comparison rate*).
This is for borrowers or refinancers with 60% LVR i.e. a 40% deposit or equity.
Borrowers with 80% LVR pay a slight premium at 6.14% p.a. (6.38% p.a. comparison rate*).
The 'Flex' home loan line has an offset account, which comes at no interest rate premium; instead, borrowers are charged a $250 annual fee to maintain the 100% offset.
A host of fixed rates were also cut.
How to pay no LMI with ubank
Notably, ubank is one of the few banks that does not charge lenders mortgage insurance (LMI) for loans above 80% LVR.
The maximum LVR however is 85%, and there is a 50 basis point interest rate premium for coming to the table with 5ppt less of a deposit.
For example, at 85% LVR the rate is 6.64% p.a. (6.88% p.a. comparison rate*) for owner occupiers.
When weighing up if this is a more cost-effective method, consider the extra cost of an interest rate premium versus paying LMI with another lender.
With 85% LVR the approximate LMI premium you'd pay would be $5,100 as a first home buyer on a $600,000 home loan. Of course, this varies between insurers.
At ubank's interest rates, a $600,000 home loan at 85% LVR implies a $706,000 home value, which would equate to $3,847 a month over 30 years.
At 80% LVR with a lower rate the loan repayment would be $3,437 a month, a saving of $410 a month (rounding errors may apply), or $4,920 per year.
Home buyers will also need to weigh up the extra time taken to save the extra 5% deposit, which on a $706,000 home value is $35,300.
They will also need to weigh up potential property price growth in that saving timeframe; the latest CoreLogic figures show the national median home price has appreciated 11.3% in 12 months to $802,357.
If home value appreciation is forecast to outpace your savings ratio, paying for LMI or paying a higher interest rate with a ubank 85% LVR home loan could work out to be more cost effective in the long run.
Borrowers may also find value in refinancing to a lower rate once they build equity to have an LVR lower than 80%.
CBA finds more first home buyers going it alone
Australia's largest bank Commonwealth Bank has released research indicating an increasing proportion of first home buyers are opting to enter the market alone.
Up to 40% of first home buyers purchased a property alone in the first six months of 2024, which is up from 35% in 2019.
The government may be picking up the slack in the absence of a partner.
CBA found that between 2021 and 2024, government funded guarantees soared by 45%, which coincides with the release of programs such as the Home Guarantee Scheme and other state-based equity schemes.
While ABS data does not delineate single and joint home buyers, its lending data does show the number of loans written to first home buyers has risen 3.4% compared to 12 months ago.
They made up 30.8% of the ratio of housing loans.
CBA data indicates the average first home buyer loan size was just under $498,000 through the 2024 financial year.
This is lower than the wider market average, which the ABS indicates is $535,000.
Both of these are much lower than the owner occupier average, which sits at $637,000.
Photo by R Architecture on Unsplash
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