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Western Australia has made an adjustment to its Keystart program to lower the amount of interest participants pay on their home loan.
Described as a “transitional lender”, Keystart provides home loans for those with low deposits, encouraging borrowers to refinance when it works for them.
Previously, Keystart calculated its interest rates using the average of the standard variable interest rate of the four major lenders ANZ, CBA, NAB, and Westpac. But the government has now made a major change to set its rates based on the movements of the Reserve Bank of Australia’s (RBA’s) official cash rate plus a fixed margin of 350 basis points.
This means that as of 1 July this year, Keystart borrowers have seen a decrease in their variable interest rates of almost 1 per cent.
Under Keystart’s previous policy, its interest rate would have increased to 8.51 per cent following the RBA’s rate rise in June. Instead, the interest rate payable will be 7.60 per cent.
For the average Keystart customer with a $390,000 30-year loan, the rate reduction means annual savings of almost $3,000.
The state’s premier, Roger Cook, said it was important to his government to change the program so that Keystart was “no longer linked to the decisions of the big four banks.”
REIWA CEO Cath Hart has welcomed the change to Keystart’s interest rate setting policy, describing it as a substantial change for borrowers.
“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 home owners who have Keystart mortgages, while giving more people the opportunity to buy a home,” Ms Hart said.
She described the program as a “valuable service” particularly in today’s housing market. And explained why lowering rates was important for the program to help serve its target audience.
“As a transitional government lender, Keystart offers loans with deposits as low as 2 per cent and doesn’t charge Lenders Mortgage Insurance, but this means it assumes more risk and its interest rate is higher than most banks. 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,” she said
The change to Keystart’s interest rates follows another recent announcement to expand its Urban Connect Home Loan program to include one-bedroom apartments and introduce funding for off-the-plan apartment developments.
ABOUT THE AUTHOR
Juliet Helmke
Based in Sydney, Juliet Helmke has a broad range of reporting and editorial experience across the areas of business, technology, entertainment and the arts. She was formerly Senior Editor at The New York Observer.
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