Home loan at 1.99% comes with a catch

The lowest fixed rate home loan in Australian history is being offered by Tasmanian bank Bank of Us.

They're offering 1.99 per cent fixed for one to three years, for owner-occupiers paying principal and interest repayments with a deposit of 10 per cent or more.

The catch however is it is exclusive to residents of Tasmania.

Sally Tindall, research director at RateCity.com.au, said it was the start of a new era for home loans.

“From tomorrow, Tasmanians who live in their own home can apply for a mortgage rate that starts with a one,” she said.

“This is game on for homeowners looking to fix. We expect more low-cost lenders to follow suit with rates under 2 per cent.

“At this stage, the big four banks are unlikely to chase down the low-cost lenders, but if they start losing customers, they might be forced to cut fixed rates again.

“Even a year ago, nobody expected rates would fall this low. But these are extraordinary times and lenders are responding with extraordinary rates,” Tindall added.

Bank of Us was named Bass & Equitable, and then B&E, before changing its name to Bank of Us in 2017.