A basic home loan was originally introduced by the major lenders, such as banks and building societies, to enable them to compete with the lower than standard variable interest rate loans being offered by non-bank lenders, such as Aussie Home Loans and Wizard.
When they were first introduced, the major lenders offered reduced features to create the basic home loan. Removed were features such as the opportunity for the borrower to repay additional sums on the principal, the ability to redraw and the 100 per cent offset facility attached to the loan. The aim was to differentiate the basic home loan from the standard variable rate home loan. Its name reflected this no frills packaging.
However, market competition has led to most of these features being introduced to the basic home loan, with the exception of the 100 per cent offset facility.