More than half of Australian mortgage holders are unaware what interest rate they are currently paying on their home loan, despite interest rates topping the list of reasons why borrowers switch lenders, a new survey has revealed.
A national survey commissioned by CUA has revealed that 28% of borrowers are “not sure” of their current home loan interest rate and a further 32% only knew “approximately” what rate they were paying. This means 60% of Australians are unaware of what home loan rate they are paying.
According to CUA’s head of product, Mark Petty, this result is surprising and disappointing.
“For most of us, our home is our most valuable asset and our mortgage is typically our biggest weekly expense, so it is really surprising just how low the awareness is about what people are actually paying on their loan,” he said.
“We’re seeing people shopping around much more than we were 6-12 months ago. More borrowers are looking to smaller lenders, including credit unions, and around 42% of mortgage holders had switched lenders, or thought about it, in the past six months - up from 31% in May 2015. Of that number, nearly half cited interest rates as one of their reasons.”
However, Petty told Australian Broker
that this could be a golden opportunity for brokers.
“There is an opportunity for brokers here to help in educating borrowers about differences in interest rates and why customers should take notice. For instance, the interest you'll pay and your repayment amount on 4.09% p.a. is very different to what you'll pay on a rate that is 0.5% p.a. higher at 4.59% p.a.,” Petty said.
“Around 40% of the home loans CUA issued in the past six months have been through the broker channel. We know brokers are a popular channel for borrowers who want to find the right loan and compare different loan options, without needing to visit multiple lenders. For the large number of borrowers who aren't up to date on their current interest rate, brokers may be helping to bridge the knowledge gap.”
Despite the low awareness of the true cost of their mortgage, the survey also found that 60% of mortgage holders thought they’d be able to pay their loan off in less time than the term of their loan.
One in four survey respondents expected to pay off their loan in under 10 years, and 40% estimated they’d pay their loan out in 10 to 20 years – much less than the typical home loan term of 25 to 30 years.