More than half of Australian homeowners polled in a recent survey are unaware of the exact interest rates on their home loans – an issue which could cost them large sums of their hard-earned cash.
A survey commissioned by brokerage firm Mortgage Choice involving a representative sample of more than 1,000 respondents has found that only 46.5% knew their current interest rates – a significant drop from 61.5% in 2018 and 71% in 2016, when the previous surveys were conducted.
About two-thirds, or 64.5%, of borrowers aged 30 to 39 admitted to not knowing their interest rates, the highest among all age groups, followed by 56.4% of those aged 50 to 59 years.
Susan Mitchell, chief executive officer at Mortgage Choice said it is crucial for homeowners to pay attention to their interest rates because if they have been complacent, “the chances that they are paying too much are extremely high.”
“Every Australian should make it a New Year’s resolution to review their home loan,” Mitchell said. “Give yourself an early Christmas present by reducing your rate and saving on repayments.”
The study also revealed that many Australians were not keeping track of their interest rates or checking to see if they were getting the best deal. Asked how often they reviewed their home loans, 13.7% of respondents answered never, 44.4% said every couple of years, and 41.9% said they review their loans annually.
Mitchell said she “strongly encourage” borrowers who have not reviewed their loans in the past 24 months to speak their brokers or lenders to know if their mortgage interest rates are still competitive.
“In the past year alone, the cash rate has dropped by 65 basis points, and many lenders are open to negotiating on rate reductions,” Mitchell said. “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.”
Mitchell said the new year has presented Australians a great opportunity to improve financially.
“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,” Mitchell said. “There has never been a better or more important time for all Australians to take charge of their financial wellbeing.
“At this time of year many of us will start setting new fitness goals and find a personal trainer or sign up for online fitness classes,” she said. “I urge any borrowers who may be neglecting their home loan to keep the same mindset when it comes to their financial wellbeing.”