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Are you paying too much on your mortgage?

Our research shows 52% of Australians aren’t confident they’ve found the best home loan deal for them. Could you be paying too much on your mortgage?


uno customer and co-founder of an IT recruitment business Bloc Technology, Roman Lenio was not afraid to switch lenders to get a better deal on his two mortgages with his partner. After refinancing their home mortgage and the loan on their investment property (both in Sydney), the couple will now save thousands of dollars a year in interest.

Interviewed by The Sydney Morning Herald last week, Lenio, 37, says switching to a better mortgage deal was well worth it: he shaved 0.2 percentage points off both loans to arrive at rates well under 4%.

Many Australians miss out on savings because they are not prepared to refinance. Our new research shows two thirds of Aussie homeowners have never switched their rate and one in seven would never leave their bank – regardless of how big the discount.

We spoke to 1500 mortgage holders about their satisfaction with their home loan and their switching habits and found out some pretty crazy stuff! Turns out we’re a pretty lazy, loyal and scared nation. We compiled the results in this report: ‘Laziness, loyalty and fear: why Aussies don’t switch home loans’. 

Our research found Aussies who have switched their rate are paying 13 basis points less on average than those who haven’t, with the common roadblocks to not switching being loyalty to their current bank or lender, the perceived amount of effort required to switch, and the fear of talking about finances.

“If you’re unhappy with your current home loan deal but stay anyway, you’re effectively paying an inertia tax,” says uno Home Loans founder and CEO Vincent Turner, who advises mortgage holders to shop around every year or two to ensure they’re always getting the best rate.

The cost of not switching

A comparison of interest rates revealed that people who have switched pay an average rate of 4.29% versus the 4.42% interest rate being paid by those who haven’t switched. Say what! On an average $500,000 loan, this equates to someone paying $468 more per year – or $14,040 extra over a 30-year loan. That’s a lot of money. You could buy a brand new watch, fly business class to Europe… 

Loyalty

Many Australians are fiercely loyal, spending a long time glued to the same rate and opting for well-known lenders. Nearly half have had their home loan for more than five years, two-thirds have been a customer of their lender for more than five years, and three quarters have their loan with a Big Four bank. On top of this, 15% would never leave their lender – regardless of how big the discount. With 70% of all marriages undergoing an affair at some point, turns out Aussies are more loyal to their bank than their spouse.

Laziness

Laziness is a big factor when it comes to not switching. More than two-thirds of Aussies who haven’t switched say they’ve been turned off by the effort. More than three quarters wouldn’t bother leaving their lender for a 20 basis point discount – a saving that would equate to $700 a year on an average $500,000 loan. Get off the couch, people! 

Fear

Amazingly, many Aussies are more driven by a fear of awkward conversations than they are by saving money. Half of those who admit to not switching say the thought of having their finances reviewed by a third party puts them off. And we thought you were all scared of spiders! 

Luckily, with uno Home Loans you can do almost everything online – sans the awkward convos. Unlike the veil of mystery put up by many banks, with uno you can unlock some of the sharpest rates out there by taking about 28 seconds out of your life here.

Misinformation

Fees also put many borrowers off switching, with nearly two-thirds saying that exit fees are a deterrent to switching and saving. This is despite the fact that lenders are no longer allowed to charge exit fees on variable rate loans taken out after 30 June 2011.

“In many cases, people estimate exit fees to be higher than they actually are,” says Turner. “Rule changes have meant that exit fees have come down significantly in the last few years and can end up being only a couple of hundred dollars.

“Interest rates are at historically low levels, so it’s a great time to push through the roadblocks that have prevented you from switching and trade up to a better deal.”

Are you driven by laziness, loyalty or fear?

If so, it’s possible you’re paying too much for your home loan.

Happily, you can start unlocking potential savings with just a few clicks. So go on – take those 28 seconds we mentioned earlier to plug in a few details to see what you could be saving.

 

This information is general in nature and you should always seek professional advice when making financial decisions.

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Hannah Tattersall worked as a journalist in Sydney, New York and Edinburgh before joining uno as its Content Editor. She has written for The Australian Financial Review, The Sydney Morning Herald, Qantas The Australian Way and In The Black, among other titles, and worked for 21st Century Fox and News Corp. She writes content aimed at buyers, investors, refinancers and anyone interested in the home loan process and welcomes feedback on how we can make uno's content better for you.

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