Why home loans are becoming a "financial waste" for Aussies

By Gerv Tacadena

Homeowners are wasting thousands of dollars by not hunting for better mortgage deals.

Homeowners are wasting thousands of dollars by not hunting for better mortgage deals, a study by Uno Home Loans found.

Australians typically take a "set and forget" approach to their mortgages — despite the changes in the market, they tend to stick with their existing deals, which usually become less competitive over time, Uno chief executive Anthony Justice said.

In fact, home loans have become Australia's second-largest cause of financial waste, next to unused food products.

"Most consumers are on a pretty good deal when they first take their home loan out. But over time, lots of things change and it's not easy for them to understand how healthy their loan is," Justice told The New Daily.

Also read: Major banks offer higher rates, take longer to approve home loans — study

Home-loan borrowers in New South Wales and Victoria tend to lose the most significant amount by not switching to a more competitive loan. Justice said it is crucial for borrowers to regularly check how their mortgage rates compare to those in the market and to always be on the lookout for cheaper home-loan offers.

"On average, we think consumers only switch once every five years in Australia, and we think that's probably too long. Consumers who have been on the same deal for five years can probably do better," he said.

The table below shows the home-loan wastes by state and how much borrowers could potentially save by switching.

State

Home loan waste

Average saving

Western Australia

$474m

$1,100

South Australia

$229m

$800

Victoria

$1bn

$1,200

Tasmania

$79m

$800

ACT

$88m

$1,300

New South Wales

$1.3bn

$1,300

Queensland

$730m

$1,000

Northern Territory

$43m

$1,200

Given the low interest-rate environment, borrowers need to look for home-loan offers with mortgage rates around the lower 3% range, Lendi co-founder David Hyman said.

"It's really likely that you are paying too much. Regardless of whether you are an owner-occupier or investor, have a look at financial comparison websites. When you are calling your lender you are going to be talking to their retention teams, and you need to be armed with information," he said.

Not sure which type of loan is best for you? Head to Your Mortgage's Compare Home Loans tool to find the most competitive mortgage deals in the market.

 

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