Australians are increasing their home loan repayments, saving money

author-avatar By on February 24, 2021
Australians are increasing their home loan repayments, saving money

Australians are loosening the mortgage belt and getting ahead on their repayments, according to Greater Bank.

The customer owned bank said more customers are paying off more of their home loan than ever, with over 75% of its mortgage customers more than one month in advance on their mortgage repayments as at 31 January 2021. 

As an example, it said customers with a $300,000 Ultimate Variable Home Loan with a loan term of 30 years could save $16,051 and reduce their loan term by two years just by paying an additional $20 a week on their loan.


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.

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%. If products listed have an LVR <80%, they will be clearly identified in the product name along with the specific LVR. The product and rate must be clearly published on the Product Provider’s web site. Monthly repayments were calculated based on the selected products’ advertised rates, applied to a $400,000 loan with a 30-year loan term.

Treasury figures show that Australian households deposited $100 billion more in their savings accounts in the 12 months to the end of November 2020, as Australians changed their spending habits due to uncertainty around employment and finances as a result of COVID-19.

During the same period, Greater Bank reported an increase in customer home loan repayments, which the bank says also aligned with the availability of more flexible repayment options on home, personal and business loans.

Greater Bank CEO Scott Morgan said for many Australians a home loan is the biggest debt they will ever have, and it's important to pay it off as soon as possible.

“Customer research that we undertook in November last year highlighted that paying off their home loan sooner was the number one financial priority for our customers,” Mr Morgan said.

“While COVID placed financial stress on many customers, it also provided an opportunity for us to work closely with those affected to ensure they remained financially secure through the pandemic, but also for many customers to actually improve their financial position by paying more off their home loan.

“On the back of recently released, record low home loan interest rates, customers continue to be well positioned to reduce both the interest payable and term of their loan, and realise their dream of owning their home sooner,” Mr Morgan said.

Customer-owned Greater Bank recently slashed its 'no-frills' one-year fixed rate to 1.69% p.a. (3.49% p.a. comparison rate*) making it one of the lowest fixed rate owner occupier loans on the market.

See also: The pros and cons of lowering your home loan repayments

How much you could save by making extra home loan repayments

Customers can potentially save a lot of money over the years by paying above the minimum required repayment. 

If your home loan allows you to make extra repayments you can pay off your loan faster - even just contributing an extra $100 a month could shave off thousands in interest over the life of your loan. 

For example, if you took out a $400,000 home loan with a loan term of 30 years, here's how much you could potentially save by contributing an extra $100 a month after the first five years according to Savings.com.au research:

Interest RateMin RepaymentAdditional contributionInterest saved by extra repaymentsTime taken off loan term
1.80% p.a $1,439/month $1.539/month $7,198 2 years
2.50% p.a $1,580/month $1,680/month $10,621 2 years
3.60% p.a $1,819/month $1,919/month $16,858 2 years 

Calculations via Savings.com.au's Extra & Lump Sum Payment Calculator.


Photo by Samson Katt from Pexels

Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:

  • The big four banks are: ANZ, CBA, NAB and Westpac
  • The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2020. They are (in descending order): Credit Union Australia, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
  • The larger non-bank lenders are those who (in 2020) has more than $9 billion in Australian funded loans and advances. These groups are: Resimac, Pepper, Liberty and Firstmac.
  • If you click on a product link and you are referred to a Product or Service Provider’s web page, it is highly likely that a commercial relationship exists between that Product or Service Provider and Savings.com.au

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.

In the interests of full disclosure, Savings.com.au, Performance Drive and Loans.com.au are part of the Firstmac Group. To read about how Savings.com.au manages potential conflicts of interest, along with how we get paid, please click through onto the web site links.

*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.

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author-avatar
Emma Duffy joined Savings.com.au as a Finance Journalist in 2019 after spending a year as the editor of The Real Estate Conversation. She's passionate about empowering people to make smart financial decisions and improve the financial literacy of Australians by translating complex finance topics into understandable, relatable content.

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