Nila Sweeney

The global economic downturn has created the lowest interest rates in nearly 50 years. But which home loan reigned supreme in the 17th Annual Your Mortgage Magazine’s Mortgage of the Year Awards?

Welcome to the 2009 Your Mortgage Magazine Mortgage of the Year Awards. It seems we say this every year, but in the last 12 months a veritable revolution has taken place in the Australian home loan market.

When we last took a survey for the Mortgage of the Year Awards, bank standard variable rates were around 9.46% – their highest level since early 2000.

But then rates started dropping, thanks to the worsening global economy. Since September 2008, the Reserve Bank of Australia slashed the official cash rate by 4%. This brought the standard variable rate down to 5.82% as some banks chose not to pass on the full rate cut.

The non-banks realised that they were in danger of losing their hard-earned market share to the banks, unless they rolled up their sleeves and started to compete aggressively on the thing that matters most to customers – the price.

So between some assertive marketing from all the lenders and some encouragement for a sluggish economy from the Reserve Bank of Australia, rates have now been forced down to their lowest level in nearly five decades.

Competition still king
Like the previous Mortgage of the Year Awards, the results are strikingly close.

This is great news for borrowers, as this competitiveness will no doubt continue in the future.

While interest rates appear to have stalled for the moment, some experts are predicting the cycle has bottomed out and interest rates could rise as quickly as they dropped.

In the meantime, property prices continue to plateau and fall in some areas around the country. Again, this is good news for buyers!

All told, borrowers are in an enviable position to begin on the path to home ownership. They enjoy great home loan products and low interest rates.

Buying a home is never easy, but we hope these Awards will make choosing the best loan for you an easier and more enjoyable experience.

Over the following pages we are proud to present to you Australia’s top mortgage products to help you finance your dream home or investment property. We looked at every aspect of the loans in order to impartially judge the best loans for new homebuyers, second homebuyers and first-time investors. About 1,000 mortgage products in our database have been carefully vetted using a wide-range of criteria to ensure you are getting the best value home loan.

The awards
To be eligible for the awards, products must be available in two or more states of Australia. For the purposes of the awards, institutions are divided into two groups:
  • Banks
  • Non-bank lenders
Product categories
This year, Your Mortgage has introduced new categories to reflect the diversity of mortgage products in the market place. These were divided between bank and non-bank lender products and include:
  1. Best Standard Variable Loans
  2. Best Basic Variable Rate Loan
  3. Best Three-Year Fixed Rate Loan
  4. Best Five-Year Fixed Rate Loan
  5. Best Intro Loan
  6. Best Low-Doc Loan
  7. Best Line of Credit Loan
  8. Best Reverse Mortgage (Only one winner for both bank and non bank
  9. Best New Product (Only one winner)
Medal categories 
Gold, silver and bronze medals were awarded to institutions for all the categories based on the three scenarios outlined below (except for line of credit and reverse mortgage). These scenarios effectively sum up the major mortgage market sectors.

SCENARIO 1 
First homebuyer: A couple struggling to buy their first home. They can only afford a small mortgage for an inexpensive house in a major city.

SCENARIO 2
Second homebuyer: 
These upgrading mortgage shoppers have a relatively high combined income (or an even higher single income) as well as a healthy deposit.

SCENARIO 3 
First time investor: 
Anyone with at least a partially paid-off first home who is in a position to buy an investment unit.

The table below outlines the characteristics of the borrowers in each scenario and shows the criteria on which the calculations were based. Note: the available deposit does not include the money saved for disbursements such as stamp duty.

 

  Owner Occupied Loans Investor Loans
 

Scenario One
First Home Buyers

Scenario Two
Upgraders
Scenario Three
First Time Investor
Available deposit/equity $30,000 $100,000 $60,000
Amount borrowed $250,000 $300,000 $250,000
Home/unit price $280,000 $400,000 $300,000
Loan to Valuation ratio 90% 75% 80%
Payment Frequency Monthly Monthly Monthly
Length of loan 25 years 20 years 15 years
Interest rates
The rates listed in the awards tables are taken from the information in our database as of 26 May 2009. It should be taken into consideration that interest rates, particularly those in the fixed categories, can change even without movement in the RBA base rate.

Loan criteria
All Mortgage of the Year Awards are offered to residential mortgages only (ie, for loans for owner-occupied or residential investment houses and units) and a loan must be widely accessible to the general public to be eligible. Any loans that had or required a borrower to belong to a particular group or organisation were also ineligible. Features that could be accessed only through one particular method, such as internet transfers, did not have any points awarded to them.

Loans were also excluded if they did not fill our qualifying conditions. For example, if the discounts only apply when additional expenses are incurred by the borrower, the interest rate reductions were not included in our calculations.
We also did not include bonus programs or giveaways when allocating points. For example, borrowers who took out a loan with some lenders could qualify for extra frequent flyer points or a free holiday.

As such bonuses were not directly related to the value of the product, we did not consider such offers when awarding points.

Our awards focused solely on the loan product, and did not take into consideration any offers such as free transaction or savings accounts.

The true cost of loans
A key component of the judging criteria is the mortgage comparison rate (MCR). The MCR expresses, as closely as possible, the ‘true’ cost of a loan by including all measurable fees into an annual interest rate – with the exception of government and statutory fees.

The MCR incorporates the basic interest rate with all fees charged by the lender necessary to establish and maintain the loan.

The MCR was then multiplied by 100 (“MCR x 100”) to provide a base figure. From the base figure, points were deducted for any additional features such as redraw, access, offset accounts, and portability. The lower the score (ie, the cheaper the loan with more features), the better.

Disclaimer: Interest rates, roll rates and comparison rates are correct as at 26th May 2009. Comparison rates have been taken for home loans $250,000 at 25 years unless indicated otherwise.

The AWARDS

Mortgage of the Year
This award is given to the best overall product in Scenario Two (ie, second homebuyers) providing it has a variable interest rate, is an owner-occupier home loan, is widely available in more than two states or territories, the lender is well established and of substantial size, and the product has a significant market presence.

Best mortgage for First Homebuyers
This award will be given to the best overall product in Scenario One (ie, first homebuyers) providing it has a variable interest rate, is an owner-occupier home loan, is available in more than two states or territories, the lender is well established and of substantial size, and the product has a significant market presence.

Best mortgage for Investors
This award will be given to the best overall product in Scenario Three (ie, investors) provided it has a variable interest rate, is an owner-occupier home loan, is available in more than two states or territories, the lender is well established and of substantial size, and the product has a significant market presence.
 
Best New Product
The Best New Product was awarded for new products, or new features on existing products. Our panel of experts looked at a range of criteria, including: originality, marketability, and whether or not there was an equivalent product or feature already in the marketplace. The Best New Product winner fills a niche or ‘problem area’ in the market and does so in an untried or unique way. There is no hard and fast rule for this Award. It could be awarded to a product based on a new innovative feature, value for money or targeting a type of borrower previously not accommodated in the mortgage market.
 
Best Bank  and Non-Bank  Lender of the Year Awards
Lending institutions offering the broadest and most competitive home loan products and have won the most gold, silver and bronze medals, were awarded the Best Bank and Best Non-Bank Lender of the Year Award, respectively.

Mortgage of the Year
Pacific Mortgage Group 
Standard Variable Home Loan

Pacific Mortgage Group is the winner of the Your Mortgage magazine Mortgage of the Year Award for 2009, recognising its combination of low rates, minimal fees and flexible repayment options in its standard variable loan.

While consistently one of the top performers in this publication’s annual awards issue, this year marks the first time Pacific Mortgage Group has won the best overall product category. Buyers in 2009 have been keen to find the lowest cost this year, and they can find great savings at Pacific Mortgage Group, which offers a standard variable rate of 4.81%. Following heavy drops in the federal cash rate since last year, PMG’s rate is nearly half of last year’s Mortgage of the Year winner, which was 8.40%.

All lenders have lowered their rates significantly from last year, but Pacific Mortgage Group has reached down furthest to offer the best product.

“I’m honoured to receive this award, especially in this highly competitive home loan market,” says Pacific Mortgage Group CEO John Khall. “Pacific Mortgage Group strives to ensure that all its customers are provided with the best home loan options at all times.”

Without any application or ongoing fees, Pacific Mortgage Group’s standard variable loan also has a comparison rate of 4.81%. Thus, borrowers can feel confident they are getting more than just a low interest rate. They are also getting flexibility with that value.

The winning product allows borrowers to set up a loan account, while having the option of unlimited redraw for everyday purchases – as if it were a standard everyday account. There is no monthly limit on the number of withdrawals, which can be made through ATMs, EFTOS and internet banking. Payments can be made weekly, fortnightly or monthly.

Portability is also allowed without cost, meaning customers can transfer their loan to a new home at no extra cost, and the ability to switch to a fixed rate at no fee. You do not have to feel tied down to this loan whatsoever.

Even in a tighter lending climate, this product offers a Loan to Value Ratio (LVR) of 95% for a loan at or below $750,000 in a metropolitan area, and 90% for up to $1m. Borrowers can also opt to pay interest only for up to 10 years on the loan.

Khall says all the benefits add up to set this variable rate product apart from the rest. “We have fully featured home loans together with a competitive low rate, and combined with quick turnaround times in processing,” he says.

Winning features:

  • 4.81% interest rate
  • unlimited redraw transactions with no maximum limit and no fees
  • internet, phone and ATM banking
  • option of interest only repayments for up to 10 years
  • LVR of 95% for loan up to $750,000
Best Non-Bank Lender of the Year
Homestar Finance

A wide range of top products from Homestar Finance have ensured it this year’s award as our Non-Bank Lender of the Year.

Along with three Silvers and two Bronze medals in our competition, it ranked a close second for Mortgage of the Year with its Homestar Fleximax Loan. That particular product, with a 4.82% interest rate and identical comparison rate, was only slightly behind the winner. It has no ongoing fees, can be converted to fixed at any time, has 100% offset, can be split, and has a loan to value ratio of up to 90% for first homebuyers.

That same Fleximax product also ranked second in our calculations for the Best Loan for First Homebuyers, Best Loan for Investors and third for Best Standard Variable Loan. Homestar’s Securimax Loan, which carried only a slightly higher comparison rate as Fleximax at 4.84%, finished with a Silver for Best Standard Variable Loan. The Securimax product has minimal fees, including no application fee and no cost for redraw.

Homestar’s fixed five-year loan also took a bronze medal. Its fixed three year loan finished a notable fourth amongst like products as well. Both over a Loan to Value Ratio of up to 95% with insurance, and fixed for up to five years.

The wide spread of top-performing products all added up to a non-bank lender that can be counted on to offer some of the best rates and lowest overall cost, no matter what the product you are after.

“For Homestar, winning the Non- Bank Lender of the Year Award is public recognition for all the hard work that our team has put in to ensure that our customers always receive the very best value and the best service that the mortgage market has to offer,” says Homestar Manager Andrew Donaldson.

While some borrowers chase only the lowest rates, Homestar has stayed true in its aim to also offer quality service as well. It is something Donaldson says his company has focused on in the past year, especially.

“Homestar was originally built on the philosophy of putting the customer first, which means that we have always strived to deliver the best possible service, as well as the best rates,” he says.

“This past year has simply reinforced the importance of this philosophy as we have found that, whilst we always have highly competitive products, it is our service which keeps our customers coming back.”

For example, we offer super-fast approvals so our customers get an edge in the market when buying their property. Sometimes a single day can be the difference in getting that dream home or great deal.”

A multi award winner
 
Silver: Best Loan for First Homebuyers
Silver: Best Loan for Investors
Silver & Bronze: Best Standard Variable Loan
Silver: Best Fixed Five-Year Loan
 
Bank of the Year
Westpac

Westpac dominated the fixed rate category this year, pulling in the top two products for both three- and five-year fixed products. But it was the variety of other strong products as well that ensured it was chosen as this year’s Bank of the Year.

It ranked second for Best Low-Doc loan, third for Line of Credit, and two fifth place finishes in Best Standard Variable and Best Basic Variable loans.

Across the board, Westpac was the Bank that consistently offered the best products. And its wide offerings ensure customers have plenty to choose from.

“The breadth of our offering is very competitive,” says Westpac Head of Product – Mortgages, Nathan McMullen. “We have some of the broadest range of low-doc loans, variable loans, fixed rate loans and line of credit loans. We’re competitive across the whole suite.”

It was in the fixed-rate category where Westpac showed the most dominance, however. Its Premier Advantage Package product from $250,000 to $500,000, was best for both three- and five-year fixed rate mortgages. With interest rates potentially reaching their bottom soon, these could be leading products in a field of growing interest from homeowners.

Westpac took another podium position for its low-doc product, based on its competitive rate. The bank does not charge an interest rate premium for any product with Loan to Value Ratio (LVR) of up to 80%, whereas some competitors only offer up to 60%. They also offer package benefits for a wide range of low-doc products. Customers can get rate discounts on both their fixed and variable rate low-doc loans.

Across all loans, Westpac offers a maximum 95% LVR for existing Westpac customers and up to 90% for customers with no banking relation with Westpac. Flexibility and competitive prices are key draws to all the Westpac products.

“Relative to our competitor, we offer competitively priced and feature-heavy basic loans that aren’t available elsewhere,” says McMullen. “For our package mortgages, the strength of these products is the ‘free for life’ proposition, so customers don’t need to pay anything to split, top up, switch or upgrade their property. All these are free.”

Customers can also be assured that as one of Australia’s leading banks, Westpac has a presence throughout the country with ATMs and tellers easily found. It claims to be one of only 11 banks globally with a credit rating of AA or higher.

Combining that stability with a consistency of competitive offerings, including some of the best loan products available, Westpac is a well-deserved Bank of the Year winner this year.

Five podium finishes

Gold: Best Three-Year Fixed
Silver: Best Three-Year Fixed
Gold: Best Five-Year Fixed
Silver: Best Five-Year Fixed
Silver: Best Low-Doc
Bronze: Line of Credit

Best Home Loan for First Homebuyer
Pacific Mortgage Group 
PMG Standard Variable

Pacific Mortgage Group continued its domination of the first homebuyer category, winning for a second straight year in the Your Mortgage magazine awards. Open to both banks and non-banks, this category was dominated by the latter, ultimately providing the lowest rates and minimal fees. And with government incentives and rising rents pushing more and more former tenants to buy lately, the first homebuyer market has become a major target of lenders.

For this award, we aimed at a scenario where a buyer can only afford a small mortgage for a relatively inexpensive property. Our first homebuyer had a $30,000 deposit, and was looking to borrow $250,000 to purchase a $280,000 house. Our hypothetical first home buyer was going in search of a 25-year mortgage, and wanted to make repayments on a monthly basis.

The Pacific Mortgage Group’s standard variable home loan took first place thanks largely to its low rate of 4.81% which, being part of a fee-free product, remained unchanged when fees were taken into account to provide a rate for comparison.

Other features that contributed to Pacific Mortgage Group’s win were a high LVR of 95% with mortgage insurance, portability to transfer to loan to a new home at no extra cost and the ability for customers to switch to a fixed rate at no cost should they wish to.

The winning product allows borrowers to set up a loan account, while having the option of unlimited redraw for everyday purchases – just as if it were a standard everyday account. There is no monthly limit on the number of withdrawals, which can be made through ATMs, EFTOS and internet banking. Payments can be made weekly, fortnightly or monthly.

“The main thing first homebuyers are looking for is a low competitive rate, combined with the option of making additional repayments at any time, and also a redraw facility,” says Pacific Mortgage Group CEO John Khall.

The Homestar Fleximax Loan took a close second place, offering the second lowest interest rate of our top three products of 4.82% (also at 4.82% when fees are factored in for comparison). Two of the key point-scoring features of this product are that it allows the customer to make additional repayments at no cost, while also offering a redraw facility. The product can also be switched to a fixed rate at any time for no additional cost

Homestar Manager Andrew Donaldson says he expects the first homeowner surge to continue, at least until the government incentives run out as currently projected at the end of the year. “With talk about the First Home Owner Grant coming to an end, it is a good idea for those who are eligible to take advantage of these excellent incentives while they still can,” he says. “At Homestar, we assist a large number of new homebuyers with their home finance. We know what a big difference it can make to a successful transaction.”

Winning features:

  • interest rate of 4.81%
  • portable with no extra fee
  • LVR of 95% with mortgage insurance
  • option of interest only repayments for up to 10 years

Winners

Gold: Pacific Mortgage Group 
PMG Standard Variable
Silver: Homestar Finance 
Homestar Fleximax Loan
Bronze: Ratebusters 
Fightback Premium

Best Home Loan for Investors
Pacific Mortgage Group
PMG Standard Variable
 
Showing their versatile strength, this year’s winners for Best Home Loan for Investors were also the same three for Best Home Loan for First Homebuyers.

And with investors, Pacific Mortgage Group’s Standard Variable home loan once again came out on top – earning it one of its four Gold medals in this year’s competition.

Second place went to Homestar’s Fleximax Loan, and third to the Ratebusters Fightback Premium home loan. The overall impressive performance of all three loans shows that they are geared for a wide range of homebuyers.

Pacific Mortgage Group’s Standard Variable home loan is especially popular with its customers, and it is a product that the company’s CEO John Khall says is better than the loans offered by banks.

“We have found that borrowers still want to use smaller lenders compared to the big banks, mainly for the lower rates and better service levels,” says Khall. “The main features of the PMG Standard Variable loan are the low rate and option of interest-only repayments up to 10 years, which a lot of investors prefer.”

Pacific Mortgage Group scored highly for giving its standard variable home loan a low interest rate of 4.81% and, as this is a fee-free product, the comparison rate for this product also remained at 4.81%. The loan also picked up extra points for offering a high LVR with mortgage insurance of 95% – well above the competitors. Other features of this all-in-one product include the option to switch to a fixed rate at no cost, allowing unlimited free withdrawals per month and offering numerous access points for customers to make a withdrawal from – including ATM, EFTPOS, phone and Internet.

The second-placed Fleximax Loan from Homestar is also a low-cost option, with only slightly higher interest rate of 4.82% (also 4.82% including fees for comparison). This product can be converted to fixed at any time, has unlimited redraw, can be split, and a loan to value ratio of up to 90% for first homebuyers.

Third place went to another variable rate product – Ratebusters’ Fightback Premium home loan. This carried at high ranking interest rate of 4.86%, and a comparison rate of 4.88%. Features include no-cost and no minimum redraw, an offset account, and additional repayments allowed. The LVR can reach 80% with this product.
 
Winning features:
  • interest rate of 4.81%
  • portable with no extra fee
  • LVR of 95% with mortgage insurance
  • option of interest only repayments for up to 10 years

Winners

Gold: Pacific Mortgage Group 
PMG Standard Variable
Silver: Homestar Finance 
Homestar Fleximax Loan
Bronze: Ratebusters 
Fightback Premium

Best Reverse Mortgage
Royal Bank of Scotland (RBS)
Reverse Mortgage

Royal Bank of Scotland (RBS), formerly ABN AMRO, has taken out the Gold medal for the Best Reverse Mortgage in the Your Mortgage Mortgage of the Year Awards 2009. This Reverse Mortgage product has stolen the show three years in a row now, thanks to its competitive interest rates and flexible features.

The RBS Reverse Mortgage product had a variable rate set at a competitive 6.55% and a fixed-for-life interest rate of 8.25%. Borrowers can also opt for five, 10, 15 and 20-year fixed terms as an additional option.

The RBS product allows their reverse mortgage customers to have their funds delivered via lump sum payments, instalments, indexed instalments as well as cash reserve/flexible drawdown. A combination of two or more of these options is also available, as is the option to have them combined into one facility. Funds can be used for any purpose, and there are no postcode or locality restrictions.

Borrowers of RBS can rest easy knowing that their Reverse Mortgage has an unconditional no negative equity guarantee (NNEG) which prevents them from ever owing more than the value of their homes. Borrowers also have the option of quarantining up to 25% of the value of their property.

In addition, borrowers have an unqualified guarantee that they will get all the approved instalment payments, regardless of any movements in the value of their security. RBS’s Reverse Mortgage offers this guarantee for the life of the loan.

The product accepts non-standard security such as holiday homes and investment properties, as well as company title properties. Commercial properties were accepted as suitable security in the past, but this option has now been eliminated.

Borrowers of the RBS Reverse Mortgage incur zero ongoing monthly fees as well as zero ongoing valuation fees. The product is available via brokers and through RBS alliance partners and will cost $700 to establish. Borrowers will also incur a $300 settlement fee.

If the customer wishes the pay out the loan early, there will be an early repayment fee charged – but this is waived if they die or move into aged care. The fee is a flat 1% of the original amount borrowed, and is applicable only within the first five years of the loan term.

Martin Lynch, head of reverse mortgage products for RBS, says it is its flexibility, low interest rates and low fees that makes the RBS Reverse Mortgage product the best in the industry today. “The Flexible Drawdown facility is probably the key factor making our reverse mortgage product advantageous however. The ability to get money when you want it, without and drawdown fees is obviously popular. It minimises both the interest cost and any Centrelink impact for customers.”

Winning features:
  • competitive variable and fixed interest rate options
  • no ongoing fees and valuation fees
  • unconditional no negative equity guarantee (NNEG)
  • no maximum limit
  • accepts non-standard form of security including company titles and investment properties
  • no restrictions in terms of use of funds

Winners

Gold: Royal Bank of Scotland (RBS) (formally ABN AMRO)
RBS Reverse Mortgage
Silver: Australian Seniors Finance 
Lifetime Loan
Bronze: Suncorp 
Reverse Mortgage (white label of RBS RM product) 

Best New Product
BankWest Rate Tracker Ultra Home Loan

It has been a year of few innovations in loans, as lenders have consolidated products rather than offering new ones in the current credit crisis environment. But within that atmosphere, there have been some who have aimed to take a good product and make it better.

BankWest has done just that, taking an already popular new product from 2008 and turning it even better in 2009. Its Rate Tracker Ultra Home Loan follows much of the same logic of last year’s award winning Rate Tracker, but makes it even more attractive to borrowers.

The premise for this variable rate product is that for the for first three years of your loan, BankWest calculates the average of the standard variable rates of the big four banks and then take off 0.90% p.a. for your own rate. It is a first-of-its kind offering that came online last year. That formula currently translates to an interest rate of 4.85% and a comparison rate of 5.40%.

Twelve months earlier, the comparison rate was at 9.46%. And whereas the 2008 product lasted just two years, this latest offer extends it to three. Once it expires, it reverts back to BankWest’s Lite Home loan rate – sitting at 5.58% comparison rate right now.

“We had great success when we launched Rate Tracker in 2008, and benchmarking the rate against other banks rates clearly differentiated us from them,” says Paul Vivian, BankWest head of mortgages and savings. “Feedback we received was that customers were really looking for a longer discount period and offset options – something we added to Ultra by introducing a three-year option – and on offset facility with our award-winning Zero Transaction Account.”

That new 100% mortgage offset facility means you can deposit your savings and income to help you save more in the long run. And if you need to access it, there’s unlimited ATM usage with a BankWest Zero Transaction Account.

It is a nice thing to know that you will always be doing better than the major bank offerings. The product applies to investment loans as well as owner-occupied.

On top of the attractive interest rates and flexible features, the Rate Tracker does not charge deferred establishment fees if borrowers opt to pay it off earlier.

“Bankwest has a record of introducing new and innovative products and Rate Tracker Ultra is a great example of that,” says Vivian. “We’ve found that this product has very broad appeal, being taken up by first homebuyers, investors and refinance customers. It’s far from being a niche product because it addresses what most mortgage customers want – good value.”

Winning features:
  • interest rate discount of 0.9% p.a. from the four big bank’s average for the first three years
  • current interest rate of 4.85%, comparison rate: 5.40%
  • maximum LVR of 95% with lenders mortgage insurance
  • reverts to BankWest’s Lite Home loan rate after three years
  • unlimited extra repayments
  • no deferred establishment fee
Basic Variable Loan 2009 – Non-Bank
Ratebusters
Fightback Premium

The Ratebusters Fightback Premium product took out the Gold medal for the Best Basic Variable offered by a non-bank this year, followed by the RAMS IO Maximiser which claimed the Silver.

The winning product has an attractive comparison rate of 4.88%, with an interest rate of 4.86%. Fred Rasheed from Ratebusters says it is these ongoing low rates are the main draw for customers.

“This is not a honeymoon rate. It is an ongoing good rate that is between 0.8–0.9% lower than the average bank standard variable rate,” says Rasheed.

The Fightback Premium has a full transactional 100% offset account and the ability to split the loan up to four different ways.

Rasheed believes it is these features, and plenty more, which helped the product claim the Gold.

“The Fightback Premium is more than just a basic variable product,” he says. “Borrowers can save thousands by depositing their salaries into the true offset account and they have no restrictions when making additional free repayments.”

Rasheed says Ratebusters also enforced some restrictions to the product to help shield Fightback Premium borrowers against volatile economic conditions. Borrowers must have a 20% deposit and they can only borrow up to $750,000 per property. No credit card is included with the loan, but borrowers receive Visa debit card. “In this environment a lot of people have large amounts of debt. The debit card encourages borrowers to only use the money they already have, and it costs nothing to access it. So this is a very conscientious loan,” says Rasheed.

If the customer borrows more than $250,000 there are no upfront costs to set up the loan. The product has no ongoing account keeping fees and no annual fees.

The Silver medal went to the RAMS IO Maximiser. This product is known as the low rate home loan for investors, but is a great product for owner occupiers as well according to Rasheed. The comparison rate for a home loan of $250,000 on a 25-year loan term on the IO Maximiser is 4.87%.

This product falls behind its Gold competitor in regards to flexibility and features. The IO Maximiser does not offer borrowers an offset account or direct salary credit, and has a minimum redraw amount of $1,000. However, borrowers can make unlimited free additional repayments and redraws.

Easy Street FS took out the bronze medal within their Basic Variable home loan, thanks to the competitively low 5.09% interest rate. The product’s low comparison rate of 5.11%, high maximum LVR of 95% (with LMI) and flexible direct salary crediting feature also helped Easy Street claim third place in the esteemed Basic Variable non-bank category.
 
Winning features:
  • competitive 4.88% comparison rate
  • low interest rate of 4.86%
  • unlimited amount of additional repayments
  • 100% offset
  • free redraws (Max redraws via net = $5,000)
  • maximum 80% LVR with LMI
  • maximum 80% LVR without LMI
  • free facility to switch rate to fixed

Winners

Gold: Ratebusters
Fightback Premium
Silver: RAMS Home Loans
RAMS IO Maximiser
Bronze: Easy Street FS
Basic Variable 

Best Basic Variable 2009 – Bank
ING Direct
Mortgage Simplifier

ING Direct took out the gold medal for the Best Basic Variable Rate Loan offered by a bank with their Mortgage Simplifier product.

The Mortgage Simplifier came out on top thanks to its competitive comparison rate of 5.10% (5.09% interest rate). It also offers flexible features such as unlimited free redraws and unlimited additional repayments. The direct salary crediting feature also allows customers to trim down their interest payments by depositing all their salaries into their home loan account.

Lisa Claes, executive director mortgages at ING DIRECT, says some of the other advantages of their basic variable rate loan are the zero establishment and ongoing fees, and the ability to repay the loan using either a principal and interest or interest-only method. The loan is also portable, allowing borrowers to transfer their home loan from one security to the next for a $250 fee.

“Our customers are attracted to products that are low on fees and non-restrictive,” says Claes. “In the current environment, borrowers are focused on reducing their home loan balance and the Mortgage Simplifier provides them with the flexibility to make additional repayments in the knowledge they can access these additional funds at any time.”

Borrowers of the Mortgage Simplifier can access their funds via internet and phone banking, as well as by BPAY and mail. ING Direct also allows customers to borrow up to 90% loan to value ratio (LVR) with lenders mortgage insurance (LMI) and up to 80% LVR without LMI.

The Mortgage Simplifier is available to owner occupiers and investors looking to take advantage of current low interest rates to get their foot into the market with a safe but flexible product.

The Silver medallist for the category of Best Basic Variable Loan offered by a bank was won by St.George with their Basic Home Loan product. This product allows borrowers to make unlimited additional repayments, redraw for free as many times as they like and split their loan for a small $150 fee. The St.George Basic Home Loan has a 5.18% comparison rate and 5.16% interest rate.

Bronze winner, Colonial-branded products of CBA, out-matched the Gold medallist by allowing borrowers of their Basic Variable Three-Year Rate Saver to borrow up to 100% LVR with LMI and up to 80% LVR without LMI. It is also an introductory rate product which offers a low interest rate of 5.06% for the first three years, rolling to a variable rate of 5.23% after that.

All three winners allow borrowers to use a portability function for a fee of $500 or less.
 
Winning features:
  • competitive comparison and interest rates
  • direct salary crediting
  • 90% LVR with LMI, 80% without
  • unlimited free redraws
  • unlimited free additional repayments
  • access to funds via phone, mail, internet and BPAY
  • ability to split for $100 fee
  • switch to fixed for $250

Winners

Gold: ING Direct
ING Direct Mortgage Simplifier
Silver: St. George Bank
Basic Home Loan
Bronze: Colonial-branded products of CBA
Basic Variable Three-Year Rate Saver
 
Best Standard Variable – Non-bank
Pacific Mortgage Group
PMG Standard Variable

Going hand-in-hand with its other awards this year from Your Mortgage magazine, Pacific Mortgage Group has won for the best standard variable loan offered by a non-bank. As with its other awards, the low comparison rate of 4.81% was the major factor.

But this rate was also boosted by the features and absence of fees. Customers can borrow up to 95% of the loan to value ratio, something unmatched by most competitors. Customers can also switch to fixed at any time, and have the option of interest only repayments for up to 10 years.

John Khall, CEO for Pacific Mortgage Providers says the fully-featured home loan, together with a competitive low rate and quick turnaround times in processing, made it a very popular product.

“The interest level has been quite promising lately, as we are finding a lot more investors are returning to property. Owner occupiers have been very active, especially with first homebuyers,” he says.

Homestar was not far behind, taking silver and bronze medals for its Fleximax and Securimax loans, respectively. The strength of those products also helped Homestar with Non-Bank Lender of the Year in this issue.

The Fleximax Loan, with a 4.82% interest rate and identical comparison rate, was only slightly behind the winner. It has no ongoing fees, can be converted to fixed at any time, has 100% offset, can be split, and has a loan to value ratio of up to 90% for first homebuyers.

Homestar’s Securimax Loan, which carried only a slightly higher comparison rate as Fleximax at 4.84%, finished with a silver for Best Standard Variable Loan. The Securimax product has minimal fees, including no application fee and no cost for redraw.

“What we have found is that more and more Australians are making smarter choices, and that it is easy to save money while not sacrificing service or product flexibility,” sasy Homestar Manager Andrew Donaldson. “At Homestar, we understand that for our customers, ‘every dollar counts’.”
 
Winning features:
  • low comparison rate and interest rate of 4.81%
  • portable with no extra fee
  • LVR of 95% with mortgage insurance
  • option of interest only repayments for up to 10 years
  • unlimited redraw

Winners

Gold: Pacific Mortgage Group
PMG Standard Variable
Silver: Homestar Finance
Homestar Fleximax Loan
Bronze: Homestar Finance
Homestar Securimax Loan
 
Best Standard Variable – Bank 2009
One Direct
Variable Rate loan

One Direct easily took the Gold medal for the Best Standard Variable product offered by a bank, thanks to its flexible features and low comparison rate of 5.05% – well below the competition.

Along with the low rate, borrowers can count flexibility in repayment. Additional repayments can be made at no cost, and the frequency of repayments can be weekly, fortnightly or monthly. Borrowers may also qualify to take a three month ‘holiday’ from paying the mortgage if necessary.

Borrowers can take up to 90% of the value of their property, or 80% without the lender’s mortgage insurance. Portability and interest-only repayment options are also included.

Customers can also credit their salary into your loan and use it like a transaction account. They can then withdraw or transfer any money which is additional to their scheduled repayments, as they need it.

“The One Direct variable home loan is packed with features to simplify borrowers’ finances and is flexible enough to cater to their changing needs, which is important in these uncertain times,” says Meg Bonighton – Head of One Direct, noting it is the lender’s most popular loan.

Silver medallist Commonwealth Bank offers a comparison rate of 5.21% for their three year special Economiser Home Loan. Borrowers get a discount on the Base Variable Rate for the first three years, as well as a wide range of flexible features.

Those features include the option of interest-only, or principal and interest repayment. Repayments can be made weekly, fortnightly or monthly, and are not limited when you have extra cash. Free redraw is also provided. Loan terms of up to 30 years are also available. And the connection to a major bank such as Commonwealth Bank can be beneficial to many borrowers as well, who will get free transactions and no monthly account or withdrawal fees.

The third place award went to the Adelaide Bank Variable Smart Fit loan, offering its customers a 5.69% comparison rate, as well as the flexibility of unlimited repayments and loan to value ratios of up to 90% (subject to lender’s mortgage insurance), and free electronic redraw with a minimum of $500.

Winning features:
  • competitive comparison rate of 5.05%
  • competitive interest rate of 5.04%
  • additional repayments allowed
  • up to 90% LVR
  • portable
  • ability to split loan prior to settlement
  • interest only repayment option

Winners

Gold: One Direct
One Direct Variable Rate
Silver: Commonwealth Bank
Economiser Home Loan
Bronze: Adelaide Bank
Variable SmartFit
 
Best Three-Year Fixed – Bank
Westpac
PAP 3y $250K–$500K

Westpac’s fixed-rate loan products did especially well in this year’s Your Mortgage magazine Mortgage of the Year awards. Not only did Westpac take the Best Three-Year Fixed home loan title for bank lenders with its three-year fixed rate product, but it also took the top spot in the Best Five-Year Fixed category for banks.

The Westpac Premium Advantage Package Three-Year Fixed Rate ($250– $500K) home loan offered a very attractive interest rate of 5.59% (comparison rate of 5.46%) – one of the key points on which Westpac outscored its rivals. It also scored highly for offering a generous LVR of 95% with mortgage insurance for its existing customers. Other features that saw Westpac’s PAP Three-Year Fixed Rate ($250K–$500K) loan take the Gold award were the option given to customers to make additional repayments with no break cost or prepayment administration fee being charged until they hit the $25,000 mark, the option to switch to a fixed rate and the portability to move the loan to a new home if necessary (for a fee of $300). The product also offers free redraw during the fixed term.

“We allow redraw on our fixed loans, so customers can make additional repayments but can also redraw which is unusual for a fixed loan. Other products in the market allow customers to make additional repayments, but they can’t access those additional repayments,” says Nathan McMullen, head of product – mortgages, with Westpac.

Westpac customers can also enjoy a 0.20% discount on their fixed rate loans as a part of the Premier Advantage Package if they borrow a minimum of $150,000.

Taking the silver medal for Best Three- Year Fixed Home Loan of the Year is another Westpac product: PAP Three- Year Fixed ($150–$250K). Also offering similar features but with slightly higher comparison rate at 5.67%.
Third place, and our bronze award, went to ING Direct Three-Year Fixed Rate product, is offered at 5.89%. Borrowers can borrow up to 90% LVR with mortgage insurance. Borrowers are allowed to make extra loan repayments up to $10,000 per year, but redraw is not permitted until the fixed term ends. The loan is portable but you need to pay $250 each time you move it to another property.
 
Winning features:
  • low interest rate of 5.59%
  • LVR of 95% with mortgage insurance for existing Westpac customers, 90% LVR for non Westpac customers
  • additional repayments up to $25,000
  • redraw
  • branch, internet and phone access

Winners

Gold: Westpac Bank
PAP 3y $250K–$500K
Silver: Westpac Bank
PAP 3y $150K–$250K
Bronze: ING Direct
ING Direct Fixed 3y
 
Best Three-Year Fixed – Non-Bank
Easy Street
Fixed Three-Year Loan

Easy Street’s three-year fixed rate mortgage grabbed the Gold medal ahead of Better Option’s fixed-rate product, leaving Sapphire Mortgage Services in third place with its Sapphire Plus three-year fixed.

Easy Street’s product defies a typical fixed rate loan by carrying some of the broadest range of features such as 100% offset and additional repayments. This enables borrowers to enjoy the stability of a fixed repayment as well as the option of making extra repayments as often as they wish. The loan offers unlimited free redraw access with no minimum amount needed. The loan can be combined with other types of mortgages and can be transferred to another property at no cost.

“Easy Street’s Three- Year Fixed mortgage represents great value as not only does it offer a low fixed rate of 5.39% p.a. (5.19% p.a. comparison rate), but you’ll find there are no hidden costs,” says Aletia Harvey at Easy Street.

“We want to make managing your mortgage easy, which is why we don’t penalise our borrowers for making additional repayments. We provide a 100% offset facility, and we don’t set minimum amounts for redraw.”

For those looking to apply for a fixed loan, Easy Street Fixed Three-Year loan can be taken up to 95% of the purchase price (with LMI). In addition, Easy Street’s minimum loan amount of $100,000 does not restrict these benefits to larger mortgages.

“It comes with all the standard features you would expect from your mortgage including the ability to make weekly, fortnightly or monthly repayments, 24/7 access via internet banking, the ability to apply online, loan terms up to 30 years and the ability to refix your mortgage at the end of the three years should you choose,” says Harvey.

Better Option Home Loan’s three-year fixed followed closely in second place, thanks to its competitive comparison rate. Like the gold winner, Better Option’s three-year fixed product offers borrowers the flexibility to make extra repayments but it caps it to $10,000 per year during the fixed term. It carries no ongoing fees, no valuation fee and a maximum LVR of 90% with lenders mortgage insurance (LMI).

Bronze medal winner, Sapphire Mortgage Services’ Sapphire fixed three-three year loan also carries no monthly or annual fees and no application fees. It offers a generous LVR of up to 100% inclusive of capitalised lenders mortgage insurance.

Winning features:
  • low interest rate of 5.39%
  • 100% free offset
  • unlimited additional repayments
  • no minimum redraw amount
  • unlimited redraw
  • free portable facility
  • branch, internet and phone access

Winners

Gold: Easy Street FS
Three-Year Fixed
Silver: BetterOption
BetterOption Three- Year Fixed
Bronze: Sapphire Mortgage Service
Sapphire Plus Three- Year Fixed
 
Best Five-Year Fixed – Non-Bank
Better Option
BetterOption Five-Year Fixed Rate Loan
 
Better Option Three-Year Fixed Rate Loan has won the Gold medal for the Best Five-Year Fixed Rate Loan in the non-bank category. Coming in close second was Sapphire Mortgage Services’ Sapphire Plus Fixed Five Year, followed by Homestar Finance in third place.

Better Option Five Year Fixed Rate customers can borrow up to 90% of the loan to value ratio (LVR) with lenders mortgage insurance (LMI) and up to 80% of the LVR without LMI, and also have the ability to make up to $10,000 in additional repayments per annum free of charge. Borrowers can combine it with standard variable loan and can transfer the loan to another property at $250 fee.

“Our fixed products are competitive in terms of rate as well as the flexible features we offer with them,” says Dennis Mei, manager of Better Option Home Loans.
The flexibility of the product is further enhanced by allowing borrowers to switch to a variable rate at any time and re-fix at the end of the five-year period – both completely free of charge and break costs. The winning product can be accessed via phone and internet and has no monthly ongoing fees.

Silver medallist Sapphire Mortgage Service allows their Sapphire Plus Five- Year Fixed borrowers to make additional repayments up to 20% of the fixed loan amount (over the fixed period). Borrowers may be attracted by their low 5.89% comparison rate and 5.5% interest roll rates.

Plus Fixed Five-Year customers can borrow up to 100% of the LVR inclusive of the capitalised lenders mortgage insurance. However the cost to use their portability feature will set them back $250 and breaking the fixed period to switch to variable at any time during the fixed rate period will incur break costs.

Bronze winner Homestar Finance Five Year Fixed Rate Loan also boasts competitive comparison rate of 5.45%. Borrowers can borrow up to a maximum of 90% LVR with LMI and can make extra repayments during the fixed term, however, redraw is only allowed after the fixed term ends. The loan can be split and transferred to another property at no cost.
 
Winning features:
  • low interest rate of 5.79%
  • maximum LVR of 90% with mortgage insurance
  • additional repayments up to $10,000
  • redraw
  • branch, internet and phone access

Winners

Gold: BetterOption
BetterOption Five-Year Fixed Rate Loan
Silver: Sapphire Mortgage Service
Sapphire Plus Five- Year Fixed
Bronze: Homestar Finance
Homestar Five-Year Fixed Rate
 
Best Five-Year Fixed – Bank
Westpac
PAP 5y $250K–$500K

Westpac’s winning streak continued by taking out the gold medal in the Best Five-Year Fixed Rate – Bank Category in this year’s awards.

The biggest plus for Westpac’s PAP five year fixed rate loan ($250–$500K) is its flexible features which allow borrowers to pay off their mortgage faster.

By offering additional repayments up to $25,000 and the ability to access that extra money, borrowers can enjoy both the security of a fixed loan repayments as well as the flexibility to get ahead of their mortgage.

Borrowers of Westpac’s five-year fixed rate products can take up to 95% loan to value ratio (LVR) if they have an existing relationship with the bank. The loan also carries a competitive comparison rate of just 5.88%

Coming close behind, snatching the Silver medal, was another Westpac product: the PAP Five-Year ($150–$250K) loan. Like its Gold-medal-winning sibling, this product also comes with all the flexible features albeit at slightly higher comparison rate at 6.05%.

If taken as a part of the Premier Advantage Package, the loan offers borrowers 0.20% rate discount if they borrow a minimum of $150,000.

Taking the Bronze award is the ING Direct Five-Year Fixed Rate product, is offered at 6.69% (comparison rate at 5.81%). Like its three-year fixed rate offering, borrowers of ING Direct’s five-year loan make extra repayment of up to $10,000 per year. The product does not carry any ongoing fees, monthly fees or annual transaction fees. The loan can be accessed via the internet, EFTPOS and over the phone. It can be split, and can be transferred to another property as a security for a $250 fee.

Winning features:
  • low interest rate of 6.39%
  • LVR of 95% with mortgage insurance for existing Westpac customers, 90% LVR for non- Westpac customers
  • additional repayments up to $25,000 per annum
  • redraw
  • portability
  • branch, internet and phone access

Winners

Gold: Westpac Bank
PAP 5y $250K–$500K
Silver: Westpac Bank
PAP 5y $150K–$250K
Bronze: ING Direct
ING Direct Five- Year Fixed
 
Best Line of Credit – Bank
One Direct
One Direct Equity Loan

The popularity of these flexible home loans has brought some competitive products into the market since they were introduced back in the 1980s, making this year a very competitive one in the Best Line of Credit category.

One Direct fought off a long line of competitors to take this year’s Your Mortgage magazine Gold award for best line of credit loan in the bank category, with their One Direct Equity Loan. Hot on its heels in second place was ING Direct with their SmartPack Smart Home Loan greater than $300,000, and in third place was Westpac Bank with their Line of Credit – PAP Equity Access $250,000– $500,000 home loan.

The One Direct Equity Loan has a comparison rate the same as its interest rate, at just 5.23%. The product scores highly for its flexible offerings, including the ability to make unlimited additional repayments and free withdrawals.

Other features, including free portability, helped sealed the Equity Loan its position on the top of the podium. The portability function allows customers to transfer the loan to a new home for no extra fee. The product also allows customers to make withdrawals by several methods, including ATM, EFTPOS, BPay, phone and internet banking.

Meg Bonighton, head of One Direct says the Equity Loan has no approval fee or ongoing fees and up to 50% of the loan can be used for business purposes.

“Better still, customers can credit their salary directly into the loan and use it like a transaction account because there is no minimum redraw amount and no redraw fee,” says.

Bonighton says the product is best suited to customers that want flexibility in how they borrow and repay funds.

“Borrowers can structure the repayments to suit their lifestyle while they use their credit on an ongoing basis without having to apply for a new loan each time. The low-doc component makes it a great option for self-employed people who meet certain criteria, but who may not have the documentation that is required for a traditional home loan.”

The Silver award winning product from ING Direct, SmartPack Smart Home Loan greater than $300,000, offered an interest rate of 5.19% and scored highly for giving its customers fee-free access to their funds from a variety of sources – including phone, internet and BPAY.

Westpac Bank scored the Bronze award, with their Line of Credit – PAP Equity Access $250,000–$500,000 home loan. The product offers a competitive comparison rate of 5.48% (5.26% interest rate), and scored highly for a range of features including portability and direct salary crediting.
 
Winning features:
  • comparison and interest rates of 5.23%
  • LVR of 80% maximum LVR
  • unlimited extra repayments
  • no minimum redraw amount
  • free portability
  • split facility for $100

Winners

Gold: One Direct
One Direct Equity Loan
Silver: ING Direct
ING Direct SmartPack Smart Home Loan >$300K
Bronze: Westpac Bank
LOC – PAP Equity Access $250K– $500K
 
Best Line of Credit Loan – Non-Bank
PMP
Evolution Home Loan Line of Credit

This year’s Best Line of Credit Loan in the non-bank category goes to PMP with its Evolution Home Loan Line of Credit. Pacific Mortgage Group took the Silver with its PMG Line of Credit home loan, while Reduce Home Loans rounded out the top three with its Reduce Line of Credit home loan bagging the Bronze award.

PMP’s Evolution Home Loan Line of Credit offered a competitive comparison rate of 5.00% and included numerous features that helped it to pile up the points and steer itself into first place.

The product is an all-in-one home loan which allows customers to combine all their income into the loan account and use it as a transaction account. Dean Mathieson from PMP says this feature can enable disciplined borrowers to minimise the interest paid on their home loan balance each month and potentially reduce their overall loan term.

“PMP believes that no one should be taking out a mortgage without having wealth creation in the back of their mind. No one wants to be paying off their home loan for 30 years,” Mathieson says. “The flexible features of having a PMP Evolution Home Loan Line of Credit, coupled with the great low rate, enable borrowers to put in place effective interest minimisation strategies which could help them increase the equity in their properties faster – as well enabling them to potentially increase their wealth by using that equity to purchase additional investment properties sooner.”

The PMP Evolution Home Loan Line of Credit also scored highly for allowing customers to make unlimited free additional repayments and for providing a free portability feature which allows them to transfer the loan to a new security if required.

The second-placed Pacific Mortgage Group, PMG Line of Credit, offered an interest rate of 4.99% – and being a fee free product, its comparison rate is also 4.99%. Those interested in the PMG Line of Credit can borrow 90% loan to value ratio (LVR) for loan amounts up to $1m (metropolitan properties only and $750,000 for regional properties) and can borrow 95% LVR for loan amounts up to $750,000 (metropolitan properties only and $500,000 for regional properties).

Bronze winner, the Reduce Line of Credit from Reduce Home Loans, had an interest rate of 4.99%, rising only slightly to 5.02% as a comparison rate.
Like the Gold-winning product, the Reduce Line of Credit is an all-in-one product. Borrowers can make an unlimited amount of redraws, however there is a $10,000 per annum limit on the amount of additional repayments they are allowed to make.
 
Winning features:
  • interest rate of 4.79%
  • comparison rate of 5.00%
  • all-in-one account
  • access seven different ways
  • free and unlimited additional repayments and redraws

Winners

Gold: PMP
PMP Evolution Home Loan Line of Credit
Silver: Pacific Mortgage Group
PMG Line of Credit
Bronze: Reduce Home Loans
Reduce Line of Credit
 
Best Intro Loan 2009 – Non-bank
RESI Mortgage Corporation
Switch and Save

The RESI Mortgage Corporation Switch and Save has won the Best Intro Rate home loan offered by a non-bank lender in 2009. The biggest advantage of the product is its direct salary crediting function and ultra low comparison rate of 5.19%.

The Switch and Save is a variable rate product which reverts to a variable interest rate of 5.25% after the first 24 months. Lisa Montgomery, head of marketing and consumer advocacy at Resi, says the Switch and Save was designed to give borrowers the benefits of a 12-month introductory rate for a longer 24-month period – while still offering a competitive roll rate.

“We wanted the Switch and Save to have as much advantage for the borrower as we could, not just for today in terms of the introductory rate but for tomorrow in terms of the revert rate,” says Montgomery. “Historically, introductory products have had high revert rates, but in this particular situation we’ve kept both rates low for the benefit of the borrower.”

The product is suitable to varying types of borrowers, especially first homebuyers and refinancers, says Montgomery.

“The Switch and Save has all the features you’d find in a good variable rate loan. Borrowers can take further advantage of the already low interest rate and make extra repayments in the first 24 months,” she says. “Also, the low comparison rate and no upfront fees means that the loan is cost effective to establish and maintain.”

The Switch and Save allows borrowers to make unlimited additional repayments and free unlimited redraws from their loan account – two of the reasons this great product scored the Gold medal in the Best Intro Loan category for non-banks.

Customers of the Switch and Save can borrow up to 95% loan to value ratio (LVR) with lenders mortgage insurance (LMI) and 80% LVR without LMI. They can also move their home loan for free using the portability function.

Silver medallist RAMS Home Loans offers customers of their Easy Start home loan the flexibility of taking up to 95% of the LVR with LMI and a maximum of 80% without LMI. Borrowers of the Easy Start can make unlimited free additional repayments and redraws (with no minimum redraw amount), but cannot deposit their salaries direct into their home loan account. The variable interest rate of the Easy Start home loan came in at 4.84% and will revert to a variable interest rate of 5.28% after the first three years. The comparison rate of the product as it stood at time of judging was 5.28%.

The Bronze-winning New Start product from Nationwide Mortgage bettered this with a variable comparison rate of 5.27% – which makes the product slightly cheaper after taking all fees into consideration. The variable interest rate is also more competitive, at 4.52%; however this rate ends after 12 months, when the new variable rate of 5.32% applies. Borrowers of the New Start product by Nationwide Mortgage require more savings than their Gold- and Silver-winning counterparts, at a maximum of 90% LVR with LMI.

Winning features:
  • low interest rate of just 4.95%
  • ultra low comparison rate of 5.19%
  • direct salary crediting
  • unlimited extra repayments
  • unlimited redraw
  • free portable facility
  • split facility at $100 fee
  • 95% LVR with LMI
  • unlimited repayment and redraws

Winners

Gold: RESI Mortgage Corporation
Switch & Save
Silver: RAMS Home Loans
RAMS Easy Start
Bronze: Nationwide Mortgage
New Start Home Loan
 
Best Introductory – Bank
BankWest
Rate Tracker Ultra

This year’s Best Introductory Loan Award in the bank category goes to BankWest with its Rate Tracker Ultra home loan. Colonial-branded products of CBA took the Silver with its Basic Variable Three-Year Rate Saver home loan, while AMP completed the winners circle with its Intro Professional Package $250,000–$749,999 home loan.

The BankWest Rate Tracker Ultra has a low interest rate of just 5.40%, which reverts to an interest rate of 5.58% after the three-year introductory period. Paul Vivian, head of mortgages and savings at BankWest, says the Rate Tracker Ultra has been firmly positioned as a highly innovative product in the mortgage industry, and a competitive alternative to those products offered by the four major banks.

“By guaranteeing customers a 0.9% discount against the pooled standard variable rates offered by those banks for the next three years, customers know that they’re getting a great deal now and into the future,” he says.

Vivian says the Rate Tracker Ultra is suitable for new purchases, refinances and for investors. “The straightforward, innovative and transparent pricing model means that all customers are getting a great deal,” he says.

The winning product does not carry any ongoing fees and borrowers can choose a repayment plan that suits their financial situation. Borrowers can also opt to do direct salary credit, make unlimited free repayments and use the free online redraw facility to access these extra funds.

The Rate Tracker Ultra has a 100% offset facility, which allows borrowers to pay their entire salary into the home loan account and benefit from an interest rate on the offset component which is equal to that of the loan.

The Silver medallist Basic Variable Three-Year Rate Saver home loan from Colonial-branded products of CBA has a comparison rate of 5.27%, and gives Colonial-branded products of CBA customers the choice of an all-in-one or a 100% offset facility.

Customers of the Basic Variable Three- Year Rate Saver can borrow up to 100% LVR with LMI and 80% LVR without LMI. Borrowers can make unlimited additional repayments, however it will cost them $50 to redraw and they will be required to withdraw a minimum of $500 each time they choose to redraw.

The Bronze medallist was awarded to AMP with its Intro Professional Package $250,000–$749,999 home loan. Concreting its position was its flexible features which also include a 100% offset account. The loan has a comparison rate of 5.45% and allows borrowers to make unlimited free additional repayments and redraws, and transfer the mortgage to another property if need be for a fee of $350. The maximum LVR for the AMP product is 90% with LMI and 80% without LMI. Borrowers can also switch to a fixed rate at any time throughout the one year introductory variable rate term of the loan.
 
Winning features:
  • comparison rate 5.40%
  • interest rate 4.85% – revert rate 5.58%
  • 100% offset account
  • 95% LVR with LMI
  • portability function
  • unlimited free repayments
  • unlimited free redraws

Winners

Gold: BankWest
BankWest Rate Tracker Ultra Home Loan
Silver: Colonial-branded products of CBA
Basic Variable Three-Year Rate Saver
Bronze: AMP Banking
Intro Professional Package $250K–$749,999
 
Best Low-Doc – Bank
BankWest
One Direct Low-Doc Equity Loan

One Direct added to their medal collection for the Mortgage of the Year Awards 2009 by taking out the Gold in the Best Low-Doc Loan offered by a bank, with their Low-Doc Equity Loan. This is essentially the same product which won the Best Line of Credit home loan offered by a bank but this low-doc version has a maximum loan to value ratio (LVR) of 60%, compared to 80% LVR with the full-doc version. This means that borrowers must have a 40% deposit or equity to take out this product.

The Low-Doc Equity Loan’s low comparison rate of 5.23% is the same as its interest rate – making it a fee-free home loan perfect for low-doc borrowers.

Low documentation loans are especially well-suited to the self-employed because, as the name suggests, they require the borrower to provide less documentation as evidence of their income than standard home loans do. For self-employed borrowers, who don’t receive a regular paycheque as proof of income, going for a low-doc loan may be their best course of action to secure the finance to buy property they are after.

The One Direct Low-Doc Equity Loan has no establishment fee and no ongoing monthly fees. Borrowers can also switch to a fixed rate at any time throughout the variable rate period without cost. Meg Bonighton, head of One Direct says the Low-Doc Equity Loan turns home or residential investment property equity into a ready source of funds that can be used for any purpose, “which may come in handy in these uncertain times,” she says.

“Whether they want to invest, take a holiday, or pay for their children’s education – it’s their choice,” says Bonighton. “The One Direct Low-Doc Equity Loan offers low-doc customers the same low rate as our regular customers along with no loan approval fee or ongoing fees. And up to 50% of the loan can be used for business purposes. Better still, customers can credit their salary directly into the loan and use it like a transaction account because there is no minimum redraw amount and no redraw fee.”

The Silver medallist Westpac Bank PAP Two-Year $250,000–$500,000 home loan has a comparison rate of 5.48% and gives Westpac Bank customers access to their funds via mail, phone, internet, over the counter and via BPAY.

The Bronze medal was awarded to the ANZ Bank Simplicity Plus Low-Doc 60 for its flexible access to funds and free unlimited additional repayments and direct salary crediting feature. The downfall of this product however, is that borrowers cannot borrow without a 40% deposit, as the maximum LVR is 60%.
 
Winning features:
  • comparison rate of 5.23%
  • interest rate of 5.23%
  • access to funds via ATM, eftpos, BPAY, phone and internet banking
  • 60% LVR with and without LMI
  • free portability
  • unlimited free additional repayments and redraws

Winners

Gold: One Direct
One Direct Low-Doc Equity Loan
Silver: Westpac Bank
PAP 2y $250K–$500K
Bronze: ANZ Bank
ANZ Simplicity Plus Low-Doc 60
 
Best Low-Doc – Non-bank
Mortgage House
Prudent Home Loan
 
Mortgage House’s Prudent Home Loan emerged as the winner of Best Low-Doc Home Loan in this year’s awards, helped by its low rate product with customer friendly features. BetterOption took second place with its BetterOption Low-Doc Variable mortgage, while RAMS Home Loans came in third with its RAMS Line of Credit SE Pro Pack 1.

The winning Prudent home loan, from Mortgage House, is an introductory product with an interest rate of 5.03%, which will revert to the variable interest rate of 5.37% after the first 12 months.

The Mortgage House low-doc product allows its customers to borrow a maximum of 80% loan to value ratio (LVR) without lenders mortgage insurance (LMI). The product’s flexibility contributed heavily to its win, with a long list of features including free redraw, unlimited additional repayments and portability.

Ken Sayer, managing director of Mortgage House, says the Prudent home loan is best suited to busy borrowers operating small- to medium-sized enterprises – thanks to its competitive pricing and variety of features.

“Borrowers can make seamless product changes with no disruption to BSB and account numbers, free principle reduction(s), free electronic link to nominated bank account, telegraphic transfers, pay anyone (EFT) and unlimited free BPAY in,” says Sayer. “The Prudent home loan has 24/7 internet access to the loan account, no ongoing monthly fees, no annual fees and borrowers can take a loan term up to 40 years.”

The Prudent product has an unlimited free redraw facility, free direct salary crediting, free splits and a 100% offset account, where interest is calculated daily and charged monthly.

A 100% offset facility allows borrowers to pay their entire salary into a transactional account (attached to the home loan account) and benefit from an interest rate on the offset component which is equal to that of the loan.

The second-placed Low-Doc Variable home loan, from BetterOption, scored highly for providing a competitive comparison rate of 5.37%. The product also offers unlimited free additional repayments and redraws, as well as a portability function to transfer the loan to a new home.

The third-place-winning RAMS Home Loans Line of Credit SE Pro Pack 1 has an interest rate of 5.29% and a comparison rate of 5.50%.

Operating much like a standard everyday account, the RAMS Home Loans Line of Credit SE Pro Pack 1 is an all in one home loan that allows customers to pay their entire income into the loan account to help reduce repayments, and then withdraw their money from the account for day-to-day purchases. There’s no minimum withdrawal amount, no fees for making a withdrawal and an unlimited amount of monthly withdrawals is allowed.

Winning features:
  • comparison rate of 5.05%
  • no maximum additional repayments
  • no minimum redraw amount
  • maximum 80% LVR (without LMI)
  • access via mail, phone and internet

Winners

Gold: Mortgage House
Prudent
Silver: BetterOption
BetterOption Low-Doc Variable
Bronze: RAMS Home Loans
RAMS Line of Credit SE Pro Pack 1t
 
How the loans are compared
Loans that qualified for the awards were ranked according to their comparison rate and the awarding of feature points (‘points’).

The comparison rate incorporates the basic interest rate with all fees necessary to establish and maintain the loan. The lower the comparison rates the better.

Points were awarded to loans according to nine main criteria. The more points the better. 

The comparison rate was multiplied by 100 and the points deducted. The lower the total the better.

Points for the 2009 awards 
Points were awarded in nine different areas within which a number of different criteria were assessed.

1. Additional payments without penalty 
Ten points were awarded to loans allowing additional or lump sum repayments, including during a capped or fixed period, without incurring any fees or charges, subject to the following conditions:

  • Variable loans: no limit to the number of additional repayments which can be made.
  • Fixed loans: maximum additional repayments must be at least $5,000 or 5% of the original loan principal per year.

Payments to a 100% offset account facility were considered to be additional repayments.

2. Combination loan facility 
Five points were awarded to products which allowed borrowers to combine the loan with one or more products for no extra cost.

3. Portability 
Five points were awarded to products which can be transferred from one property to another for a fee of $500 or less.

4. Redraw facility 
Ten points were awarded to loans with redraw facilities. Additional points were awarded based on the minimum redraw amount, with at least 12 free redraws per year.

Where products had less than three free redraws per annum, points were deducted based on the fee per redraw.

Three additional points were awarded where no limit was imposed on the number of redraws.

5. Maximum percentage of valuation lent with mortgage insurance 
Half a point was awarded to loans for every percentage point above 90% of valuation that could be borrowed with mortgage insurance. 

6. Maximum percentage of valuation lent without mortgage insurance 
One point was awarded to loans for every percentage point above 80% of valuation that could be borrowed without mortgage insurance.

We subtracted one point for each percentage point the maximum is below 80%, to a maximum of 20 points.

7. Switch to fixed/refix 
Three points were awarded to variable or introductory loans which allowed switching to a fixed loan at no cost, as well as to fixed loans which allowed the choice of another fixed term at the end of the first fixed period at no cost.

8. Offset accounts 
In Scenario Two, 60 points were awarded to a loan considered to have a 100% offset account or all-in-one account (20 points in Scenarios One and Three).

Partial offset account loans were awarded five points and three additional points if they had five or more free withdrawals per month. 

Three additional points were awarded if the offset account allowed five or more free withdrawals per month. If withdrawals or transfers can also be made, then one point was awarded for each way this could be done (eg, ATM, EFTPOS, cheque etc).

9. All in one loans 
In Scenario Three, 60 points were awarded to a loan that allowed all income to be credited to the loan account and amounts withdrawn as required with no minimum withdrawal amount (30 points for Scenarios One & Two).

Line of credit 
A line of credit product was required to have a maximum credit limit (MCL) equal to 75% of the securing property value or higher. The MCL must not reduce within the first five years of the facility and the borrower must be able to draw down to the MCL at any time during this period.

Introductory loans 
We have defined introductory loans as any fixed, capped or discount variable loan with a term of 12 months or longer, which rolls over to a higher interest rate at the end of its term, as well as any loan named introductory or discount, offered for a term of 12 months or longer.

Reverse Mortgages 
We’ve assessed the products based on a variety of criteria including:

  • No negative equity guarantee
  • Quality of funding
  • Interest rates and structures
  • Fees
  • Fund delivery
  • Protected equity option
  • Acceptable security
  • Locality restrictions
Eligibility 
Only residential mortgages were eligible. Construction, vacant land, project building, bridging loans were not included.

All institutions in the YMM loan database as at 26 May 2009 were eligible for the awards. Only products available at 26 May 2009 and still available at our publication deadline were considered.

A loan by the same provider, with the same name and interest rates but with different establishment fees in different states was treated as different products.

A maximum of two products per lender were considered in each category, according to rank.

Products had to fit all three scenarios to be considered. Exceptions are the line of credit products and reverse mortgages.

Loans only available through mortgage brokers were not eligible.

Loan fees
All fees, except government charges, were included in the calculations.

Any fee charged so as to have a particular feature included on the loan was incorporated into the points awarded.

The Your Mortgage magazine comparison rate methodology
The comparison rate formula as laid out in the Uniform Consumer Credit Code was used for calculating the awards, however the loans were assumed to remain steady throughout the remaining period of the loan. Loans with an initial fixed rate period or capped rate were assumed to revert to the rate listed as the variable/roll rate.

All fees and charges associated with each mortgage were identified, checked and standardised prior to commencing the task of determining the rankings.

Mortgage discharge costs
Mortgage discharge costs are included in the internal rate of return calculation. We assumed that these fees are charged at the end of seven years and that all loans are paid out after seven years.

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