Half of Aussie borrowers don't know their home loan interest rate

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on January 05, 2021
Half of Aussie borrowers don't know their home loan interest rate

A new study has revealed increased apathy among borrowers regarding their home loan.

A survey from Mortgage Choice found only 46.5% of respondents knew their current home loan interest rate, down from 71% in 2016 and 60% in 2018. 

Despite this complacenecy, many respondents said COVID-19 had put them under increased financial pressure.

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.

Over 62% of people said the pandemic had caused them to worry more about money, with 65.6% trying to boost their resilience by saving more, spending less and improving their financial knowledge.

Chief Executive Officer at Mortgage Choice Susan Mitchell said borrowers could put more money in their pockets simply by knowing their interest rate and looking to improve it. 

"Our research suggests that Australians are more focused than ever on their finances, yet many are being complacent with their biggest expense and potentially biggest saving," Ms Mitchell said.

"There has never been a better or more important time for all Australians to take charge of their financial wellbeing.”

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Source: Mortgage Choice

Borrowers could be forgiven for not knowing their rate, given the Reserve Bank (RBA) has cut rates by 65 basis points in the last year alone, with mixed response from lenders. 

Few lenders passed on the RBA's most recent cut in November to existing variable rate home loans, with many instead taking the knife to fixed rates, offering sub 2% fixed loans. 

Asked how often they reviewed their home loan, 13.7% of survey respondents said never, 44.4% said every couple of years, and 41.9% said annually. 

Ms Mitchell urged borrowers who hadn't reviewed their home loan in the last two years to speak to their broker or lender to negotiate a lower interest rate. 

"Let's say your principal and interest rate is 3.99% and shopping around with the help of a mortgage broker enables you to drop by 50 basis points to 3.49%.

"On a 30-year home loan of $600,000, the savings could be in the vicinity of $170 a month."

Homeowners aged 30 to 39 were the most likely to not know their interest rate (64.5%), with those aged 50 to 59 years close behind at 56.4%.

"It's so important to know your interest rate because if you’ve been complacent the chances that you are paying too much are extremely high," Ms Mitchell said.

"Every Australian should make it a New Year resolution to review their home loan."

With the Reserve Bank stating the cash rate will remain unchanged for at least three years, given the forecasted long and uneven recovery from COVID, there is unlikely to be the wealth of rate cuts from lenders seen in the last year. 

Attention has turned to fixed rates, and there is speculation the big four will claw back market share lost to non-banks and neobanks.

Among the lures enticing borrowers to switch lenders are cashback offers, which are more likely to be offered by bigger institutions taking advantage of the RBA's term funding facility.


Photo by Gabrielle Henderson 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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Alex joined Savings.com.au as a finance journalist in 2019. He enjoys covering in-depth economical releases and breaking down how they might affect the everyday punter. He is passionate about providing Australians with the information and tools needed to make them financially stable for their futures.

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