Financial comparison website RateCity is warning Australian borrowers to carefully review enticing home loan interest rate promotions, following several new promotions and home loans hitting the market this month.

In the past 30 days, five lenders have dropped some of their residential home loan rates by up to 45 basis points, which was by Beirut Hellenic Bank from its four-year fixed home loan to 7.6 percent.

Other new home loan products to enter the market include Adelaide Bank’s SmartSaver Home

Loan with an advertised rate of 6.99 percent and Bankwest’s new low-documentation home loan.

Damian Smith, RateCity’s CEO, said Australia’s major lenders are pushing harder to preserve their home loan market share.

“When the Reserve Bank keeps the lid on the cash rate it’s unusual to see lenders dropping their variable interest rates, so it’s generally good news for borrowers that some lenders are offering discounts.

“Commonwealth Bank’s No Fee home loan rate drop is a significant move from one of the biggest lenders in the country. The major four banks make up about 83 percent of the mortgage market and since National Australia Bank (NAB) launched its “breakup” campaign earlier this year, some have been fighting hard to win back market share,” said Mr Smith.

NAB grew its share of the mortgage market modestly between February and April 2011 – from
15.61 percent to 15.88 percent. This has occurred while the other big four banks went backwards slightly.

Mr Smith urges borrowers to compare home loans online before signing up to recently advertised promotions.

“It’s clear that advertising campaigns work and with the major lenders have the marketing budgets to get attention. But it doesn’t mean that borrowers will always get the best deal out of promotional home loan offers.

“For instance, we found that a 10 basis point difference in interest rates – comparing 7 percent to 7.10 percent – could mean you will pay an extra $6,000 over the life of a 25-year loan for a $300,000 mortgage.

“There are 126 variable rate loans in the RateCity database below 7 percent – and some borrowers might overlook them because they are from smaller lenders without the big brand advertising budgets. This could end up being an expensive mistake.

“Make sure you compare home loan deals online before jumping into a mortgage as it could really save you in the long-run,” said Mr Smith.