15 June 2017
New research reveals Australians have a ‘set and forget’ approach towards the home loan and are missing out on thousands
A new survey by lender ME shows Aussies are a nation of bargain hunters when it comes to lower-cost items, but are less thrifty when it comes to their biggest purchase – their home loan.
The ME Savvy Savers Survey, which investigates the bargain hunting habits of Australians, shows 90% of us love a bargain and 75% enjoy boasting to family and friends after securing a good deal.
But while 84% spend time comparing the best deals on electronics, 81% on flights and hotels, and 78% on furniture, only 62% would spend time comparing home loans.
And while 68% periodically review what they’re paying on their phone plans, 64% their insurance policies, and 60% their energy contracts, only 44% will regularly review their home loan.
ME Head of Home Loans, Patrick Nolan said: “the survey shows many Australians are price takers, not price makers, when it comes to their mortgage.
“Aussies are willing and able to bargain hunt for smaller items, but not the biggest purchase they’ll ever make – their home loan – and it’s costing them thousands.
“While Australians might save about $25 a month by switching a mobile phone provider , renegotiating your home loan rate or switching lenders could save some people, for example, up to $130 per month, $1,560 a year or $46,000 over the life of the loan (estimated saving projected on current rates).”
Nolan said there are three reasons people aren’t as bargain-conscious on home loans:
“Firstly, 74% of borrowers assume they are on a good rate, but that’s unlikely if over 80% of borrowers are with a major bank, which tend to be more expensive.
“Secondly, 41% of borrowers don’t feel they have the power to negotiate and feel like they should just accept the price they’re given.
“Thirdly, many borrowers find it difficult to compare because they’re confused about product names, features, and who and what information to believe.”
“A ‘set and forget’ mentality has developed when it comes to home-loans. But if you’re trying to get ahead, gaining $46,000 over the life of your loan is absolutely worth it.”
Nolan said another issue facing borrowers was the perceived effort required to switch lenders, with 35% of those unlikely to refinance citing it was ‘too much effort’.
He added that ME had just launched a new tool, ScroogifyTM, that simplifies the process of comparing and tells Australians how much too much they’re paying on their home loan.”
“I encourage all borrowers to visit Scroogify.com.au, and unleash their inner scrooge on their home loan.”
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About the survey: A survey on 1,500 Australians was conducted by research firm Pure Profile on behalf of ME.
We compared a 10gb monthly plan with Vodafone against a plan with Telstra.
Assumes (a) customer has an average owner-occupier loan of $400,000 with 80% LVR and 30 year term; (b) customer refinances to a ME Flexible Home Loan with Member Package1 with a current variable interest rate of 3.89%2 (comparison rate of 4.30%p.a3); and (c) customer was paying a variable interest rate of 4.40%p.a. (currently the lowest advertised home loan package offered by the major four banks (ANZ, Westpac, NAB and Commonwealth Bank) from the Canstar comparison site). Saving does not take into account rate discounts that might be available or future changes in rates. Takes into account typical discharge and mortgage registration fees charged by both the other lender and ME, but does not take into account fee waivers or other fees and charges that might apply to the refinance or on an ongoing basis. Does not take into account the value of other home loan features or benefits such as offset accounts and free credit cards. Assumes 12 monthly repayments per year for the stated term and all months are of equal length, and uses unrounded amounts to derive its results.
1. Member Package annual fee of $395.
2. Interest rate is current as at 15/06/17 and is subject to change. It includes a 0.94%p.a. discount off the variable reference rate for Flexible Home Loans with a Member Package where the primary loan purpose at application is owner occupied and where the loan amount is less or equal to 80% of the value of your property (LVR). Only applies to new home loan applications with a loan amount from $400,000 to <$700,000. The discount cannot be used with any other rate promotion. Existing applications, internal refinances, top ups, additional advances or variations of existing home loans are not eligible. We may change or withdraw this discount at any time. If you apply after the discount has been withdrawn the Flexible Home Loan with Member Package variable rate without discount (the reference rate) will apply.
3. Comparison Rate based on a Flexible Home Loan with Member Package of $150,000 for a term of 25 years. WARNING: This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.
Terms, conditions, fees and charges apply. Applications are subject to credit approval.