When you hear “interest rate,” you might think that’s the RBA’s cash rate and the margin lenders make. But there’s more to it. Lending money comes with several costs, and understanding these factors helps explain why interest rates can vary.
Fixed and variable costs
When banks lend money, they face two types of costs: variable and fixed.
Variable costs can change with the market during the life of your loan. The biggest one is cost of funds, or, what it costs the bank to get the money it lends out, whether from deposits or financial markets. These costs can be impacted by the cash rate (RBA decisions) and the volatility in global interest rates markets. When these costs shift, they can affect the rates offered on home loans for both new and existing customers. That’s why your interest rate may change after the RBA announces a cash rate change.
Fixed costs, on the other hand, are ‘locked in’ at the time your loan was funded. These include things like the banks onboarding costs and a one-off cost paid to the funder of your loan that helps cover the long-term cost of securing that funding. These costs don’t change during the term of the loan, and it’s the cost we incur as your lender for holding your loan.
Banks also need to hold a minimum amount of capital, as required by the Australian Prudential Regulation Authority (APRA). This helps protect both the bank and, in turn, the financial system from market downturns. It’s not fixed for the life of your loan, but it doesn’t swing around with market rates either. We assess it when your loan starts, and it usually stays in place for years.
Why your home loan rate may vary from our rates for new customers
Market shifts: When you took out your loan, we locked in funding at the rates available then. If funding costs drop, we can sometimes offer lower rates to new customers.
Regulation updates: APRA occasionally introduce macroprudential policies that may influence how lenders price loans. These changes can impact rates for new customers without changing your existing loan.
Funding costs can rise too: The opposite can also be true. If funding becomes more expensive due to market movements or regulatory changes are imposed, rates for new customers might be higher than what you’re paying now.
Unloan’s loyalty discount
Unloan’s annual loyalty discount of 0.01% p.a.* is designed to reward each customer for the years of loyalty, regardless of when they opened their account. While the rates we offer may change, each customer will be rewarded with a 0.01% p.a. discount on their interest rate for each year they remain with us.
* Unloan offers a 0.01% per annum loyalty discount on the Unloan Live-In rate or Unloan Invest rate upon settlement. On each anniversary of your loan’s settlement date (or the day prior to the anniversary of your loan’s settlement date if your loan settled on 29th February and it is a leap year) the margin discount will increase by a further 0.01% per annum up to a maximum discount of 0.30% per annum. Unloan may withdraw this discount at any time. The loyalty discount is applied for each loan you have with Unloan.