One in five mortgages now under 4%

Rates of the Nation, a recent analysis by comparison site RateCity.com.au, has highlighted that home loan rates continue to trend downward after two RBA cuts this year and a total of four cuts since February 2015, following a period of 18 months with rates on hold.

According to the analysis, the August RBA cut brought another 161 variable rate home loans under the 4 per cent mark, and as a result, 18 per cent of all variable home loan products are now under 4 per cent, up from 10 per cent in July.

Peter Arnold, data insights director at RateCity.com.au, commented: “While less than half of the RBA’s August cut was handed down to mortgage holders on average, there was a race to the bottom from low-rate lenders, with the lowest variable rate in the market recorded at 3.35 per cent. Fixed rates are now as low as 3.59 per cent for three years.”

The analysis noted that rates under 3.8 per cent are widely available for owner-occupier borrowers with a minimum of 20 per cent equity or deposit.

“Now more than a year since the emergence of investor pricing and the ‘ideal borrower’ and the rate gap has continued to widen,” the analysis pointed out.

“As a result of regulatory pressure from APRA to rein in investor lending and bolster balance sheets in line with new international standards, lenders are charging more for investors and for borrowers with a small deposit,” it highlighted.

Another trend that the analysis noted was that over the past 18 months, LVR pricing has shifted.

“The share of loans available to borrowers with a 5 per cent deposit has decreased from 61 per cent of all loans to just 51 per cent, and there is now a greater prevalence of loans requiring a minimum of 20 per cent deposit,” it said.

The analysis also noted that longer-term fixed rates are above variable, which suggests that “the low rates won’t last forever”.

[Related: Banking review pushes for tracker mortgages]