If your new year’s resolution is to save more money, try switching your interest rate

Forty per cent of Aussie mortgage holders don’t know the interest rate they’re paying on their home loan and are likely to be paying off their mortgage at a much higher rate than they should be.
Hannah Tattersall

Forty per cent of Aussie mortgage holders don’t know the interest rate they’re paying on their home loan and are likely to be paying off their mortgage at a much higher rate than they should be, new research from online mortgage broker unohomeloans.com.au has found.

Baby Boomers are the least aware – with just over half (50.8%) able to name their interest rate – compared to nearly two-thirds (64.5%) of millennials and 60.9% of Gen X-ers.

uno also found almost a quarter of all Aussie mortgage holders have a mortgage with the same bank they signed up to as a child and are being penalised for their loyalty by paying more interest than other homeowners.

23.7% of Aussies have a mortgage with the same bank they were with as a child or the bank their parents use

“Customers who hold a mortgage with their childhood bank pay, on average, 20 basis points more in interest than those who’ve shopped around since school,” said uno’s founder and chief executive officer, Vincent Turner.

This equates to around $1,272 more per year for an average Sydney home (or $1,188 more in Melbourne, $780 more in Canberra and $600 more in Brisbane).

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Do you know your rate?

If you don’t know your interest rate, now’s the time to find out. uno customer Chris La Fou had been paying off his mortgage on the same rate for years. He hadn’t considered refinancing his home loan as it wasn’t something he knew much about.

After chatting to www.unohomeloans.com.au adviser, Paul Sealy, Chris switched lenders and used the equity in his home to pay for renovations, a new car, and a trip to Hawaii with his mates. He walked away with almost $50,000 in savings.

“All I was doing was servicing my old loan. I didn’t know I was able to do certain things or allowed to use [the equity] to buy other things,” admits Chris. “I thought it all had to go into your property.”

“I consolidated all my debt into one. And I have a better rate of interest.”

“All my debt now is tied into the one product, which I’m quite happy about,” he says. “I consolidated all my debt into one. And I have a better rate of interest.”

Read: How uno helped Chris pay for the renovations he’d always wanted

How much can I save by refinancing?

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Stick to your resolution – switch your rate

Turner says home owners could save more than $1000 a year by refinancing – switching to a better rate – and save tens of thousands over the life of a loan. A homeowner with a $363,650 loan paying off the principal and interest at a rate of 4.1%, for example, could switch to 3.63% interest rate and save $1,176 a year in interest – or more than $35,000 over 30 years.

The best way to shop around for a better deal is to try uno’s refinancing calculator, or chat to a uno expert online, via phone or email. uno can assess a customer’s individual situation against more than 50,000 lenders rules, in real time, and display the best home loan options for them. The company’s special relationship with lenders also means uno advisers have access to rates customers won’t find elsewhere.

“With interest rates sitting at record lows, it’s an optimal time to review what you’re paying and shop around for a better deal,” says Turner. “At the moment we’re seeing rates as low as 3.63% in our base of lenders. And what better time to shop around than at the start of a new year.”

What uno uncovered

uno’s key findings, based onresearch conducted by Core Data using a sample of 1,500 Australian mortgage holders:

  • 23.7% of Aussies have a mortgage with the same bank they were with as a child or the bank their parents use
  • Interest rates among mortgage holders who have a home loan with the same bank they were with as a child or the same bank their parents use are, on average, 20 basis points higher than other rates currently on offer
  • Among owner occupied mortgage holders who have a home loan with their childhood bank or parents’ bank, the mean interest rate is 4.5% compared to 4.3% for Aussies who opted for a different lender
  • Among investment property mortgage holders who have a home loan with their childhood bank or parents’ bank, the mean interest rate is 4.8% compared to 4.6% for Aussies who opted for a different lender.

What to do next:

  • Use uno’s refinancing calculator to find out how much you can save
  • Chat to an expert about your options
  • Read more about refinancing.

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

Hannah Tattersall
* Three year fixed rate, owner occupier, P&I loan with a maximum LVR of 95% and a loan amount >$150,000. Lender rates and products may change. We cannot suggest you remain in or switch to any loan until we complete our assessment. Fees and charges apply. ^ 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. The comparison rate is calculated on the basis of a loan of $150,000 over a term of 25 years. ± All loan applications are subject to uno assessment and lender approval. uno does not guarantee that it will be able to find a customer a better loan than the one they currently have or to save them money.