Mortgage holders overlook big savings

Written by The New Daily in Interest Rates on May 11, 2021

By John Kidman – This article first appeared in The New Daily

Aussies love real estate, and if it means going into long-term debt to live the dream, so be it.

About 60 per cent of the nation’s more than 10 million properties are under mortgage. Analytics and intelligence provider CoreLogic estimated this week the Australian bricks and mortar market is worth an astounding $8.1 trillion.

Despite historically low interest rates, a chunk of mortgagees continue to pay too much for loans.

Research by leading non-bank lender homeloans.com.au reveals almost a third (30 per cent) have never refinanced.

And according to its survey of 1,063 Australians who’ve held a mortgage for at least two years, the reason most don’t change is they simply don’t consider the option (35 per cent).

For a further 27 per cent of that group, apathy was a factor. They didn’t get around to it, couldn’t be bothered or found the whole thing too complicated.

“If you’ve had a home loan for more than two years, you’d be doing yourself a disservice if you didn’t look into your options,” homeloans.com.au CEO Scott McWilliam told AAP.

“Yes, it’s a big market but right now is the perfect time for anyone who has a mature mortgage or even a relatively new one, to make sure they’ve got the best deal.”

Of the survey respondents who refinanced, their average monthly saving was $405 or nearly $5000 a year. One in five managed to claw back at least $500 each month.

Mr McWilliam said his company had been able to go a step beyond, with more than 70 per cent of refinancers achieving an average $581 a month saving or almost $7000 a year.

Just on seven per cent of those surveyed said they were saving more than $1000 a month.

While surprised at just how many customers decline to seek a cheaper mortgage, home loans expert at comparison site Finder, Sarah Megginson, says she can see why.

“We’ve just gone through what you could call a refinancing boom,” she said.

“Over the 12 months since COVID hit, interest rates fell by two per cent. So loans have been more affordable and refinancing activity has been stronger than for a couple of years.

“But I guess what (the survey) demonstrates is that there is a lot of potential for people to save money because there are so many good deals out there.”

Most (49 per cent) who take the refinancing plunge, pour the savings back into their mortgages, and a quarter pay off bills and debts.

“It really only takes a couple of hours and you can … place yourself in such a better financial position,” Ms Megginson said.

Some lenders offer online loan application tools that made the job quicke and simple.

“Having the conversation about your loan costs you absolutely nothing but not having it might cost you a lot,” Mr McWilliam added.