Heritage sacrifices mortgage margins

Margins on home loans may come under more pressure across the industry, with Heritage Bank adopting a "limited time" rate perceived by competitors as unlikely to cover its cost of funds.

Heritage Bank yesterday said it cut its discount variable home loan rate to 4.39 per cent, down from 4.69 per cent for loans greater than A$150,000 and with a maximum loan-to-value ratio of 80 per cent.

It also cut the rate on its on its standard variable loan to 4.69 per cent from 4.99 per cent.

Heritage will also waive application fees of up to $600 until Christmas Day.

Heritage chief executive John Minz said in a media release: "We're more concerned about the best financial interests of our customers than about maximising profit."

Earlier this month NAB's online banking division, UBank, announced a new variable annual home loan rate of 4.54 per cent, equalling the offer from the firm that has been the pace-setter for cheap variable rates on the market, Firstmac's loans.com.au. Loans.com.au has since dropped its rate to 4.48 per cent.

Comparison website Mozo said the average variable home loan rate was 5.22 per cent. It said there were 62 providers offering variable rates below five per cent.