Burbank, YourLand offer nation’s cheapest 3.49 per cent home loan rate in move governments called on to back

Australia’s cheapest home loan rate could save those who get it $24,000 over two years on a $750,000 loan.

Australia’s cheapest home loan rate is a wallet-saving 3.49 per cent that might be about to get even cheaper — but you’ll only get it if you’re helping fix the nation’s housing crisis.

Major building group Burbank and YourLand Developments are offering the tiny figure, which would save borrowers about $24,000 across its two-year time line on a $750,000 loan, to encourage people to build homes in select Victorian housing estates.

But with the figure 2.68 percentage points below the nation’s 6.17 per cent standard variable rate, it has already sparked calls for the government’s to copy the idea as a way to stimulate lagging housing construction nationwide.

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Housing Industry Association stats released last week show just 180,000 new homes are expected to be built nationwide in Australia this year.

The number if forecast to peak at almost 213,000 in 2028 — still short of the 240,000 figure set by the National Housing Accord as an annual target to stop home prices continuing to surge dramatically, and to help address the country’s housing affordability crisis.

With government incentives so far yielding limited results in enticing more Australian’s to build a new home, largely due to heightened building and trades costs, some builders and developers are looking for innovations to encourage buyers themselves.

The Glenwood home design by Burbank that is among those available for buyers. The $659,100 build includes three-bedrooms as standard and requires a 313sq m block size.

The Burbank and YourLand Developments 3.49 per cent finance offer is only available to those who use Burbank’s lending arm National Pacific Finance.

But it has been years since such a figure was publicly available, with Reserve Bank statistics show the last time typical variable interest rates for housing were this low was June, 2022, when they were 3.5 per cent.

While Burbank Homes operates in Victoria, Queensland, South Australia and New South Wales, currently the only eligible housing estates are in Melbourne.

They include Society 1056 in Fraser Rise, Seventh Bend in Weir Views, both in the city’s west, as well as Officer Fields and Officer Central in Officer to the south east.

Burbank’s sales and marketing general manager Anthony Garrubba said while it was looking unlikely building costs or land prices would fall any time soon, they believed it was possible to make building new homes more appealing by using a lower mortgage rate.

“The big problem isn’t demand, it really feeds back to serviceability,” Mr Garrubba said.

“The intention here is getting people a chance at home ownership.”

While not for everyone, there is a $750,000 loan cap on the offering, he said it was already leading to sales that would help get more homes built.

“This is the cheapest home loan rate in the country, and I can’t see anyone beating that,” he said.

“But the nicest part of it, is that it works. We have had a customer take it up within the first nine days of it coming up.”

The Irving design is another being promoted as part of the arrangement. It has a $677,100 starting price point.

Mr Garrubba added that the offer was also very much a variable rate, so if the Reserve Bank cut interest rates in the coming two years — the 3.49 per cent interest margin on loans issued under their program would also likely decrease.

YourLand Development’s head of sales Adam De Pasquale said after a number of challenging years for first-home buyers hoping to build a property, momentum was now changing.

“By partnering with Burbank to provide this industry-leading rate, we hope to give more Victorians the boost they need to make their dreams of building their first home a reality,” Mr De Pasquale said.

Loan Market broker Jacob Decru said while honeymoon rates weren’t unprecedented, using them to spark more housing construction around Australia was an idea government’s should be now considering.

“I love this, as it’s a good long-term thing for an entry-level buyer,” Mr Decru said.

“But this would get first-home buyers into the market, or anyone into the market — and they need more dwellings, so this might be an option instead of rebates.

“This is a really cool way of doing it. Dropping the rate to encourage building could actually be an important way they can look at as an initiative.”

Reserve Bank home lending variable rates show where figures are today, and where they have come from. Source: Reserve Bank of Australia, Australian prudential Regulation Authority.

However, Mr Decru said those considering such an offer would be wise to ensure they could still afford to pay a higher rate, so they were prepared for the end of the “honeymoon” offer in two years time when standard variable rates could be higher.

Better yet, by paying extra to match up to the standard variable rate more widely available today, 6.17 per cent, the broker said buyers using the scheme would be able to get a significant jump start on their home loan that could put them ahead for years.

Mr Garrubba said while the offer was only available in Victoria at present, they could also see the benefits of it being offered more broadly should government support the approach.

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