A number of lenders have included rate tiering in their latest mortgage rate changes, as they target lower-risk borrowers.
On Friday, ME Bank cut the variable rate on its Basic Home Loan by more than 50 basis points, reducing the rate more for borrowers with low LVRs.
For borrowers with LVRs below 80 per cent ME’s new basic variable rate is 2.58 per cent. For borrowers with LVRs above 80 per cent the new rate is 2.99 per cent.
“LVR pricing” is nothing new but RateCity says it is becoming more prevalent. Competition in the home loan market remain strong but lenders also want to reduce their risk exposure.
Since August 20, 86 400 has been offering tiered rates on its Own Home Loan. The rates are 2.59 per cent if the LVR is below 60 per cent; 2.64 per cent if the LVR is between 60 and 70 per cent; and 2.74 per cent if the LVR is between 70 and 80 per cent.
Last month, Athena Home Loans introduced a mortgage whose rate falls as the borrower pays down the loan. The AcceleRATE loan has three rate tiers based on the loan-to-valuation ratio of the loan.
If the LVR is between 70 and 80 per cent, the rate is 2.54 per cent. As the loan is paid down and the LVR falls below 70 per cent the rate falls to 2.49 per cent, and when the LVR falls below 60 per cent the rate falls to 2.39 per cent.
In June, Westpac cut its basic variable rate from 2.93 per cent to 2.69 per cent for loans with LVRs up to 70 per cent. The rate for loans with LVRs above 70 per cent was cut from 3.03 per cent to 2.79 per cent.
In July, Firstmac’s online lending subsidiary loans.com.au launched a one-year offer of a discount variable rate of 1.99 per cent, reverting to 2.57 per cent after the discount period.
The offer is available to new borrowers applying for an owner-occupier, principal and interest mortgage up to a maximum loan-to-valuation ratio of 80 per cent.