April 10, 2018 by Jason Puxty
What is the Standard Variable Rate?
Home loan lenders will often refer to their Standard Variable Rate or SVR. What is this rate, and how does it effect you?
The standard variable rate is the lenders “base product interest rate”. It is the interest benchmark or reference point for other discounted loans the lender may offer.
If you don’t obtain a discounted product, and you chose a variable loan, you will be given the current stndard variable interest rate. Each lender determines its own SVR. For example, at the time of writing this, we have the following SVR’s on owner occupied principal and interest loans.
ANZ = 5.2%
CBA = 5.22%
NAB = 5.24%
Westpac = 5.24%
Lenders will then provide a discount to these rates, for various products.
Professional Packages
The first of these are known as “Professional Packages” and many lenders will provided a discounted interest rate, as long as you pay their “package fee” of $395 per year. In many instances, the discount received, as well as the waiving of application fee’s, may make this a good deal, but not always.
You need to do an analysis of the amount you are borrowing, the discounted interest rate, and the need for features that come with “Professional Packages” such as offset accounts.
Each lender has a name for their package fee, and like all things, is linked to marketing about the benefits of it.
These are an example of the packages as of the time of writing;
ANZ – Breakfree Package -$395
CBA – Wealth or MAV Package - $395
NAB - Choices Package - $395
Westpac – Premier Advantage Package - $395
Depending on the lending amount, you will be offered different discounts off the SVR. For example, for lending over $250,000, on the Westpac Premier Advantage Package, you will be offered a discount of 0.70%, giving you a final variable rate of 4.54%.
Further discretionary discounts may be available, and this is where the broker can assist you.
Lending is like all other sales, if the lender has a large amount of funds ready to lend, but the product is not moving, they will increase their discounts to attempt to draw more customers, via the broker, to them.
CBA and ANZ are currently extremely aggressive in their pricing, and we are seeing discounts up to 1.45% off the SVR. Knowing which lender is pricing aggressively can help you save thousands of dollars per year.
Basic Home Loans
A basic home loan is a “no frills” home loan that many lenders offer. They may, or many not have an application fee, a settlement fee, or other charges.
For example, the basic St George home loan has no fee’s other than a $100 lenders mortgage insurance arrangement fee.
The CBA basic home loan has a $200 settlement fee.
These come at rates discounted off the SVR, and no package fee per year is payable. However, the lender may have a monthly fee (for example, $8 per month) which adds up.
Basic home loans can be very effective in saving money, but always be aware of all associated fee’s, and particular be aware of “introductory rates”
Your Mortgage Choice Broker, Jason or Ben Puxty, can assist you with deteriming which loan is the right fit for you.
If you have any questions, or you would like to make sure your current home loan is value for money, please call us on 02 6363 1122
