By Malavika Santhebennur
Less than half of all homeowners know their current home loan interest rate despite homeowners ranking paying off their mortgage as their top priority, figures revealed.
New research by Mortgage Choice has found that only 46.5 per cent of Australian homeowners were aware of their current home loan interest rate.
The research – which is commissioned by Mortgage Choice and conducted by CoreData via an online survey of 1,023 respondents across Australia aged between 21 and 60 who are either first home buyers (FHB) or a homeowner/investor – found a disconnect between the increased financial concerns borrowers are experiencing as a result of the coronavirus pandemic and knowledge about whether their current interest rate is competitive.
Research by Mortgage Choice over the years has revealed a consistent decline in borrower awareness of their interest rate, and an increase in apathy towards mortgage interest rates. In 2016, 71 per cent of respondents knew the interest rate on their mortgage, while 62 per cent were aware in 2017, and 60 per cent knew their interest rate in 2018.
The latest figures have come at a time when 62 per cent of respondents admitted that COVID-19 has caused them to worry more about money, with 65.6 per cent saving more, spending less, and improving their financial knowledge in an effort to boost their resilience.
Homeowners aged 30 to 39 were the most likely to not know their interest rate (64.5 per cent), closely followed by those aged 50 to 59, at 56.4 per cent.
When respondents were asked how often they review their home loan, 13.7 per cent said never, and 44.4 per cent said every couple of years, while only 41.9 per cent review their loan annually.
Commenting on the findings, Mortgage Choice CEO Susan Mitchell reiterated the contradictions in the research findings about the complacency about interest rates among respondents despite many of them increasingly focusing on their finances.
“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. Give yourself an early Christmas present by reducing your rate and saving on repayments.”
Ms Mitchell urged borrowers who have not had their home loan reviewed in the last 24 months to speak to their broker or lender to learn if their home loan has remained 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,” she said.
“Let’s say your principal and interest rate is 3.99 per cent and shopping around with the help of a mortgage broker enables you to drop by 50 basis points to 3.49 per cent. On a 30-year home loan of $600,000, the savings could be in the vicinity of $170 a month.
“An experienced mortgage broker can help you get your home loan in shape and the great thing is, you don’t have to do the exercise yourself.”
Mortgage Choice also released research about FHBs, which found that the home loan process is still “shrouded in mystery” for this cohort, and they would like more assistance with choosing and applying for a home loan.