The Whitepaper1 which surveyed 1,043 Australians in December 2017, found 38% of mortgage holders couldn’t remember/didn’t know the interest rate on their mortgage.
This data – while somewhat alarming – would suggest a high proportion of borrowers take a set and forget attitude towards their mortgage.
Unfortunately, this lackadaisical attitude can end up costing borrowers substantially over the longer term.
The reality is a home loan is one of the biggest financial investments a person will make in their lifetime. And, if they don’t review it on a regular basis, they could end paying a lot more than they should.
In the past two years the cash rate has been reduced by 50 basis points and a huge portion of this has been passed onto mortgage holders in the form of lower rates. As such, anyone who hasn’t reviewed their mortgage in the past two years could find that the interest rate on their home loan is significantly higher than it needs to be.
According to the Whitepaper, Australians over the age of 60 were the most likely to not know their home loan interest rate, with 46% admitting that they did not know the interest rate on their mortgage.
Just over 40% (40.4%) of those under the age of 30 did not know their mortgage interest rate, while 36.9% of those aged between 30 and 39 years said they were in the same boat.
If you have a home loan it is important that you don’t follow in the footsteps of 38% of Australians and take a laid back attitude towards your mortgage.
You need to keep up to speed with your mortgage and give your home loan a health check at least once yearly.
The fact of the matter is the lending market is complex and constantly changing.
Today, more so than ever before, Australia’s lenders are regularly making adjustments to the interest rates on their home loan products.
In fact, in recent months, we have seen many of Australia’s lenders adjust the pricing across their owner-occupied and investment home loan products.
In January alone, we saw a number of lenders adjust their home loan interest rates by as much as 25 basis points.
These changes – although they may seem slight - can make a significant difference to what you have to pay each month.
For example, the monthly repayments on a $500,000, 30-year home loan with a principal and interest mortgage rate of 4.5% would be $2,5332.
Meanwhile, the monthly repayments on a $500,000, 30-year home loan with a principal and interest mortgage rate of 4% would be $2,387. That is a monthly difference of $146!
Regardless of whether you would like to pay down your principal debt faster, or reduce your regular mortgage repayments, a lower rate will help you achieve those goals.
As such, it is critical you do not take a set and forget attitude towards your mortgage and instead review your product and your rate on a regular basis.
Your local Mortgage Choice broker can assess your current home loan and ensure you are in the best products with the most competitive interest rate for your needs.
So what are you waiting for? Give your local Mortgage Choice broker a call today and let' take advantage of the low rate environment.
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1 Mortgage Choice Australian Financial Savviness Whitepaper, December 2017, https://www.mortgagechoice.com.au/about-us/insights/australian-financial-savviness-whitepaper/
2 Based on Mortgage Choice online calculator, https://www.mortgagechoice.com.au/home-loan-calculators/home-loan-repayment-calculator/