Australians are increasing their home loan repayments, saving money
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.
| Lender | Home Loan | Interest Rate | Comparison Rate* | Monthly Repayment | Repayment type | Rate Type | Offset | Redraw | Ongoing Fees | Upfront Fees | Max LVR | Lump Sum Repayment | Extra Repayments | Split Loan Option | Tags | Features | Link | Compare | Promoted Product | Disclosure |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
5.94% p.a. | 5.98% p.a. | $2,978 | Principal & Interest | Variable | $0 | $530 | 90% |
| Promoted | Disclosure | ||||||||||
5.89% p.a. | 5.80% p.a. | $2,962 | Principal & Interest | Variable | $0 | $0 | 80% |
| Promoted | Disclosure | ||||||||||
5.99% p.a. | 6.02% p.a. | $2,995 | Principal & Interest | Fixed | $0 | $0 | 60% |
| Promoted | Disclosure | ||||||||||
5.93% p.a. | 5.93% p.a. | $2,975 | Principal & Interest | Variable | $0 | $395 | 70% | Disclosure |
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 Rate | Min Repayment | Additional contribution | Interest saved by extra repayments | Time 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.