New figures show banks are providing owner-occupiers who have large deposits with cheaper mortgage rates than what they offer other borrowers. Analysis from RateCity shows that banks are now favouring borrowers with large deposits who plan to live in the homes they purchase, over other owner-occupiers.

These favourable rates for cashed-up owner-occupiers follow on from last year's measures where banks were charging investors more for housing loans, something which had been common practice at many banks until the late 1990s.

The data shows banks have even cut the interest rates offered to owner-occupiers who have a deposit of more than 20 per cent, while charging other types of borrowers more. The average interest rates being offered to owner-occupiers with a 20 per cent deposit have dipped by 0.07 of a percentage point since June, to 4.35 per cent, RateCity analyst Peter Arnold told The Australian Financial Review.

"There's a lot more variation in the market, with tiered pricing," said Arnold. "These borrowers are basically paying less than they were back in June."

In contrast, other types of borrowers are offered higher interest rates than they were six months ago, RateCity found.

Its figures cover the rates banks are advertising for new customers, rather than what banks charge their existing borrowers. For property investors with deposits of less than 20 per cent, the average rate on offer has increased to 4.9 per cent from 4.68 per cent, it says.

This tighter lending to investors is expected to cause a softening in the Australian housing market this year.

See also-

How to get a home loan