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

author-avatar By 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.

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 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.

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.”

halfborrowsidk01

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 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): Great Southern Bank, 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.

*Comparison rate is based on a loan of $150,000 over a term of 25 years. Please note the comparison rate only applies to the examples given. Different loan amounts and terms will result in different comparison rates. Costs such as redraw fees and costs savings, such as fee waivers, are not included in the comparison rate but may influence the cost of the loan.

Latest Articles

author-avatar
Alex joined Savings.com.au in 2019. He is passionate about providing Australians with the information and tools needed to make them financially stable for their futures.

Collections:

Be Savings smart.
Subscribe for free money newsletters.

By subscribing you agree to the Savings Privacy Policy

Loading data please wait...

{{returnData.productName}}

Overview

Current Rate

{{returnData.currentRate | percentage:2}}

Comparison Rate*

{{returnData.comparisonRate | percentage:2}}

Rate Type

{{returnData.rateType}}

Advertised Rate

{{returnData.advertisedInterestRate}}

Comparison Rate*

{{returnData.comparisonRate}}

Monthly Repayment

{{returnData.monthlyRepayment}}

Interest Type

{{returnData.interestType}}

Total Interest Rate

{{returnData.totalInterestRate | percentage:2}}

Base Interest Rate

{{returnData.baseInterestRate | percentage:2}}

Bonus Interest Rate

{{returnData.bonusInterestRate | percentage:2}}

Total Interest Rate

{{returnData.totalInterestRate | percentage:2}}

Introductory Rate

{{returnData.introductoryRate | percentage:2}}

Introductory Term

{{returnData.introductoryTerm}}

Base Interest Rate

{{returnData.baseInterestRate | percentage:2}}

Term

{{returnData.term}}

Advertised Interest Rate

{{returnData.advertisedInterestRate | percentage:2}}

Interest Frequency

{{returnData.interestFrequency}}


Fees and Features

Ongoing Annualised Fee

{{returnData.annualFee}}

Upfront Fee

{{returnData.upfrontFee}}

Offset Account

Redraw

Principal & Interest

Interest Only

N/A{{returnData.interestOnly}}

Max loan to value ratio (LVR)

{{returnData.maxLVR | percentage:0}}

Lump sum repayments

N/A

Additional repayments

Maximum Loan Term

{{returnData.maximumLoanTerm}}

Upfront Fee

${{returnData.upfrontFee}}

Ongoing Monthly Fee

{{returnData.ongoingFees}}

Early Repayment Fee Applies

N/A

Vehicle Types

{{returnData.vehicleType}}

Maximum Vehicle Age

{{returnData.maximumVehicleAge}}

Pre Approval Available

N/A

Online Application

N/A

Account Keeping Fee

{{returnData.accountKeepingFee}}

Minimum Monthly Deposit

{{returnData.minMonthlyDeposit}}

Linked Account Required

N/A

Interest Calculated

{{returnData.interestCalculated}}

Interest Paid

{{returnData.interestPaid}}

Online Application

N/A

ATM

N/A

EFTPOS

N/A

Account Keeping Fee

{{returnData.accountKeepingFee}}

Minimum Monthly Deposit

{{returnData.minMonthlyDeposit}}

Linked Account Required

N/A

Interest Calculated

{{returnData.interestCalculated}}

Interest Paid

{{returnData.interestPaid}}

Online Application

N/A

ATM

N/A

EFTPOS

N/A

Minimum Deposit

{{returnData.minDeposit | currency : '$' : 0}}

Upfront Fees

{{returnData.upfrontFee | currency : '$' : 0}}

Annual Fees

{{returnData.annualFee | currency : '$' : 0}}

Notice Period to Withdraw

{{returnData.noticePeriodToWithdraw}}

Online Application

N/A

Automatic Rollover

N/A

Maturity Alert

N/A