84% of non-homeowners admit they don't know enough about home loans

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on May 27, 2021
84% of non-homeowners admit they don't know enough about home loans

Most Australians dream of owning a home, but the vast majority of those yet to buy admit to not understanding how financial products like home loans work.

UBank's bi-annual Know Your Numbers survey found the majority of non-homeowners (84%) said they need to know more about financial products such as home loans, interest rates and deposits.

The survey of over 1,000 Australians found just over half (51%) of those surveyed admitted to having little to no knowledge about loan-to-value ratios (LVR) or knowing what the term even means (40%).

That number rose to seven in ten (70%) of Gen Z who said they have 'little to no knowledge' about LVRs, more than Baby Boomers (55%) Millennials (46%) and Gen X (42%).

Other financial terms Australians admit to having little to no understanding of include Lenders Mortgage Insurance (41%), offset accounts (38%), and negative gearing (37%). 


Buying a home or looking to refinance? The table below features home loans with some of the lowest interest rates on the market for owner-occupiers. 

Lender

Variable
More details
UNLIMITED REDRAWSSPECIAL OFFER
  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
UNLIMITED REDRAWSSPECIAL OFFER

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
Variable
More details
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES
  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
Variable
More details
NSW/VIC/SA METRO & INNER REGIONAL AREAS
NSW/VIC/SA METRO & INNER REGIONAL AREAS

Variable Home Loan (Principal and Interest)

  • $5000 Cashback. T&Cs Apply.
Variable
More details
REFINANCE ONLY
  • A low-rate variable home loan from a 100% online lender. Backed by the Commonwealth Bank.
REFINANCE ONLY

Variable Rate Home Loan – Refinance Only

  • A low-rate variable home loan from a 100% online lender. Backed by the Commonwealth Bank.
Variable
More details
NO ONGOING FEESFREE REDRAW FACILITY
  • Rate Match Guarantee. Tic:Toc will match the rate on identical variable P&I home loans. T&C's Apply.
NO ONGOING FEESFREE REDRAW FACILITY

Live-in Variable Loan (Principal and Interest) (LVR < 90%)

  • Rate Match Guarantee. Tic:Toc will match the rate on identical variable P&I home loans. T&C's Apply.

Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. All products will list the LVR with the product and rate which are clearly published on the Product Provider’s web site. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of June 25, 2022. View disclaimer.


UBank CEO Philippa Watson said while there is a clear knowledge gap, the pandemic has encouraged many Australians to become more financially literate.

“Many customers come to us in search of ways to simplify their finances, particularly after the events of the past year,” said Ms Watson.

“One of the ways we can help them is to debunk the very common misconception that finance has to be complicated, because we truly believe every Australian should have the ability to understand and manage their finances.”

On the other hand, three in ten (31%) of Australians say they know a lot about refinancing, with 12% saying they have a 'perfect understanding'.

Additionally, one in four (24%) say they know a lot about comparison rates, while one in ten (10%) have a perfect understanding. 

“We know the appetite for home ownership is continuing to grow, with 56% of Aussies excited about the prospect of owning a home, up 13% since July last year," Ms Watson said.

“But knowledge is key and entering the property market with little to no knowledge of some essential financial terms and concepts could see Australians falling into common traps or getting themselves into situations they cannot manage."

Perhaps unsurprisingly, Baby Boomers are significantly more likely to understand how negative gearing works, with 34% saying they know a lot about it, compared with 25% of Gen X, 18% of Millennials, and 9% of Gen Z.


Photo by Daniel Gonzalez on Unsplash

Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered. Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site. Savings.com.au, yourmortgage.com.au, yourinvestmentpropertymag.com.au, and Performance Drive are part of the Savings Media group. In the interests of full disclosure, the Savings Media Group are associated with the Firstmac Group. To read about how Savings Media Group manages potential conflicts of interest, along with how we get paid, please visit the web site links at the bottom of this page.

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author-avatar
Emma Duffy is Assistant Editor at Your Mortgage and  Your Investment Property Mag, which are part of the Savings Media Group. In this role, she manages a team of journalists and expert contributors committed to keeping readers informed about the latest home loan and finance news and trends, as well as providing in-depth property guides. She is also a finance journalist at Savings.com.au which she joined shortly after its launch in early 2019. Emma has a Bachelor in Journalism and has been published in several other publications and been featured on radio.

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