Home Loan Rates In Australia. How Do We Compare To The Rest Of The World?

Home loan interest rates in Australia have been a growing topic for discussion after recent RBA rate increases and subsequent increases by lenders. While rising rates cause discomfort and put a dent in personal and family budgets, home loan rates in Australia are not the highest in the world – but they are not the lowest either. If you’ve ever been interested in comparing home loan rates around the world, here’s an overview.

 

Who has the lowest home loan interest rates?

If you’re thinking of moving overseas for better interest rates, the following countries or regions have the lowest rates rates, according to The Global Economy website:

 

  1. Luxembourg    1.62%
  2. France             1.68%
  3. Italy                 1.83%
  4. Euro area        1.89%
  5. Finland 1.97%
  6. Austria             2.03%
  7. Spain               2.13%
  8. Belgium           2.15%
  9. Portugal           2.15%
  10. Slovenia          2.20%
  11. Netherlands     2.34%
  12. Sweden           2.61%
  13. Malta               2.67%
  14. Czechia           2.71%
  15. Bulgaria           2.82%

 

These numbers represent the average interest rates for mortgage loan products provided by commercial banks in these countries between September and December 2022.

 

 

Highest home loan interest rates around the world

At the other end of the spectrum are the highest home loan interest rates in the world, which are:

 

  1. Paraguay                    10.24%
  2. Brazil                           10.47%
  3. South Africa                10.50%
  4. Bhutan                         10.54%
  5. Armenia                      11.33%
  6. Dominican Republic   12.24%
  7. Georgia                       12.44%
  8. Nepal                           12.66%
  9. Moldova                      13.01%
  10. Ukraine                       13.07%
  11. Vanuatu                       13.25%
  12. Suriname                    13.29%
  13. Liberia                         13.38%
  14. Turkey                         19.97%
  15. Argentina                     60.35%

If you’re curious about the very high rate in Argentina, this is a result of the hyperinflation in that country. Their central bank substantially increased interest rates in 2022 to combat a 70% inflation rate. In late 2021, home loan interest rates averaged 27.98%, so the rate more than doubled in one year.

 

 

Home loan interest rates in English-speaking and Commonwealth countries

Currently, these countries are in the middle of the home loan interest rates range. From lowest to high, some of these include:

 

  1. Ireland                         2.95%
  2. Canada                       3.58%
  3. UK                               3.91%
  4. USA                            6.33%
  5. Australia                      6.77%
  6. New Zealand               7.13%
  7. South Africa                10.50%

 

Where does Australia stand in world rankings?

When compared to the other countries listed (83 in total), home loan rates in Australia are below the average of 10.80% (leaving out the outlier of Argentina). Australia’s position is at 46 out of 83, so it’s near the middle of the list.

Counties with similar home loan interest rates to Australia’s 6.77% average include:

 

  • Latvia 19%
  • USA 33%
  • Jamaica 00%
  • New Zealand 13%
  • El Salvador 34%

 

Differences in lending practices around the world

 

While it’s interesting to compare interest rates around the globe, other factors come into play. Australian borrowers might find the process challenging but consider that first-home buyers in China need to make a down payment of at least 30% to 40% of the property value. For investment loans, the minimum down payment is 50% of the property’s value. For banks, high deposit amounts are a way to minimise their risk. The situation is similar in South Africa where a minimum deposit of 50% of the property’s value is required.

 

 

Home loan interest rates in Australia’s past

While recent interest rate rises have changed the housing market and lending environment, current rates are a fraction of the highs experienced in the past. In the 1960s, the variable interest rate was fairly stable at between 5% and 6%. Home loan interest rates started increasing in the 1970s and were over 9% at the end of the decade. Variable interest rates kept climbing during the 1980s and peaked at 17% in 1989. Variable rates began declining in the 1990s and were between 8% and 9% in 2000.

In the early 2000s, two events led to large decreases in the RBA’s cash rate which flowed to mortgage rates. After the September 11th attacks in 2001, central banks lowered interest rates to increase borrowing in an environment where people were not confident about the future. Also, in the wake of the Global Financial Crisis in 2008, Australia’s cash rate was quickly lowered. Between March 2008 and April 2009, the official cash rate decreased from 7.25% to 3.00%. In the 10 years from 2011 to 2021, the average variable mortgage rate fell from 7.80% to 4.5%.

 

Getting a mortgage today

While mortgage rates have recently increased, they aren’t high when put into historical perspective. As recently as 2011, the variable rate was 7.8%. In July 2008, before the impact of the Global Financial Crisis hit Australia, the average variable rate peaked at 9.6%.

Getting the right home loan for your needs at the best interest rate can go a long way in helping you meet your financial goals.

At Reduce Home Loans, our goal is to disrupt the home loan market by offering low rates and high customer service.

If you’re looking for a fixed-rate home loan, a variable-rate home loan, or a combination of the two in the form of a split loan, we’re here to answer your questions and guide you through the process.

 

Get in touch with a lending expert at Reduce Home Loans for a better home loan experience and a great rate.

 

Any statements are general in nature and do not take into account your financial personal situation, objectives or needs. You should consider whether any statement/s is suitable for you and your personal circumstances. Before making any financial decision, consider your circumstances and the product disclosure statement.

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