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.

Lender
Advertised rate Comparison rate Monthly repayment Rate TypeOffsetRedrawOngoing FeeUpfront FeesLVRLump Sum RepaymentAdditional RepaymentsPre-approval
VariableMore details
LIMITED TIME 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%
LIMITED TIME 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%
VariableMore details
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
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
VariableMore details
REFINANCE IN MINUTES, NOT WEEKS

Nano Home Loans Variable Owner Occupied, Principal and Interest (Refinance Only)

  • Refinance only. Fast online application
  • No Nano fees. Free 100% offset sub account
  • Mobile app, Visa debit card & instant payments
REFINANCE IN MINUTES, NOT WEEKS

Nano Home Loans Variable Owner Occupied, Principal and Interest (Refinance Only)

  • Refinance only. Fast online application
  • No Nano fees. Free 100% offset sub account
  • Mobile app, Visa debit card & instant payments
VariableMore details
YOU COULD WIN $100k TO PAY DOWN YOUR LOAN*

Owner Occupier Accelerates - Celebrate (LVR < 60%) (Principal and Interest)

  • For a chance to win $100K towards your home loan, apply with Athena before Oct 31 & be approved by Dec 15
  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
YOU COULD WIN $100k TO PAY DOWN YOUR LOAN*

Owner Occupier Accelerates - Celebrate (LVR < 60%) (Principal and Interest)

  • For a chance to win $100K towards your home loan, apply with Athena before Oct 31 & be approved by Dec 15
  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
VariableMore details
AN EASY ONLINE APPLICATION

Yard Home Loan (Principal and Interest) (Special) (LVR < 70%)

  • Unlimited additional repayments
  • Unlimited free redraws
  • Optional 100% offset can be added for $120 p.a.^
AN EASY ONLINE APPLICATION

Yard Home Loan (Principal and Interest) (Special) (LVR < 70%)

  • Unlimited additional repayments
  • Unlimited free redraws
  • Optional 100% offset can be added for $120 p.a.^

Rates correct as of October 17, 2021. 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 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.

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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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