Shopping around for a mortgage rate with a ?4? in front.

From this story on current variable rates

Bernie Fraser: Bank home loans should be below 5 per cent

TEN LOWEST VARIABLE RATE LENDERS

variable rate (Comparison rate*) Total upfront fees

1. loans.com.au 4.54% (4.56%) $520
2. eMoney 4.55% (4.91%) $380 (PLUS $330 annual fee)
3. iMortgage 4.59% (4.92%) $0 (PLUS $330 annual fee)
4. State Custodians 4.59% (4.92%) $682 (PLUS $299 annual fee)
5. UBank 4.62% (4.62%) $0
6. Yellow Brick Road 4.63% (4.64%) $363
7. CUA 4.65% (4.66%) $195
8. Aussie 4.69% (4.70%) $100
9. bankmecu 4.69% (4.69%) $0
10. firstmac 4.69% (4.99%) $520 (PLUS $295 annual fee)

*Comparison rate based on monthly principal and interest repayments for a $150,000 loan over a 25 year term

Source: Mozo.com.au at 5 August 2014
 
Earlier this year I had a couple come in looking to start investing in property, first step in the process being to assess their current lending and looking at the structuring moving forward.

Surprisingly, I quickly found out they were paying 6.5% for a sub 80% LVR with reasonable borrowings. The reason they chose their initial lender was because of an attractive variable rate when they signed up. Little did they know at the time was that said rate would edge up over time, not passing on cuts but passing on rises to the point of being completely un-competitive. We quickly refinanced their loan to a lender at sub 5% rates with a *track record* of competitive rates on new and existing debt. Their effective repayment term halved based on their existing weekly repayment amount, at no additional lifestyle cost.

As always, the lesson is to avoid bait advertising, and go for the true long term performers.
 
Bah humbug. I can get a mortgage interest rate at 3.0%.

I can guarantee you however, if I disclose everything about the deal, nobody will want it. :D
 
For discussion POV i'll present an alternative argument.

While brokers generally dont have access to some/most of those lenders on the list (and hence will often talk them down)- it doesnt mean that they do not have a growing presence in the market.

Fact is, today it is easier than ever before to refinance out at sub 80% lends with relatively little cost.

So while interest cost is one consideration, it is in fact a large one for many home owners - particularly PPOR owners who aren't really after much more/any debt.

CJay makes a very good point - interest rate creep is something to be very wary about with these lenders. But with close monitoring, and having sufficient flexibility to move - this can be avoided.

I've refinanced a number of clients paying premium rates from larger banks too - so the story doesnt always apply solely to cheaper ones.
 
One or maybe two properties are ok with these lenders if you know what you are doing in regards to correct loan structure because they clearly don't from what I've seen.

Like Pete I have extracted a few and they generally sting you on the way out with fees.

The market share is growing admittedly and throw Woolies and Coles into the mix it will be interesting to watch and refinance deals that are poorly structured away from them, lol.
 
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