Government lending program significantly cuts its variable interest rate
The Real Estate Institute of Western Australia has lauded the revised interest rate setting policy of the state’s Keystart program, which has resulted in a significant reduction of its variable interest rate.
As of July 1, Keystart will base its rates on the movements of the Reserve Bank of Australia's cash rate plus a fixed margin of 3.5%, REIWA said.
The rate cut translates to substantial savings for the average Keystart customer, who holds a $390,000 loan over a 30-year period. Those customers can expect an annual saving of nearly $3,000, REIWA said. Hart commended Keystart for its crucial role in assisting thousands of Western Australians in accessing affordable home ownership, particularly those who faced challenges obtaining loans from traditional lenders.
“As a transitional government lender, Keystart offers loans with deposits as low as 2% and doesn’t charge lenders mortgage insurance, but this means it assumes more risk and its interest rate is higher than most banks,” REIWA CEO Cath Hart said. “In this climate of steeply rising interest rates, this has made it more difficult for potential home buyers to qualify for a loan and added financial pressure to current Keystart mortgage holders. Reviewing the rate-setting policy is a welcome move by the government, with the change providing immediate cost-of-living relief to more than 14,000 current homeowners who have Keystart mortgages, while giving more people the opportunity to buy a home.”
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Previously, Keystart's interest rate was tied to the movement of the four major banks. Following the Reserve Bank of Australia's rate increase in June, the interest rate would have reached 8.51% under the previous model. However, with the revised policy, the interest rate will be 7.6%, mitigating the potential burden on borrowers.
Since its establishment in 1989, Keystart has assisted more than 120,000 Western Australians into homeownership. While the lender does charge higher interest rates compared to traditional lenders, it actively encourages homeowners to transition to other lenders as they build equity in their homes, REIWA said.
The adjustment to Keystart's interest rates is part of a series of changes, including the expansion of the Urban Connect Home Loan program to include one-bedroom apartments and the introduction of funding for off-the-plan apartment developments.
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