Three years ago, UNO set out to disrupt and digitise the mortgage broking process. In that time, we have learnt a considerable amount about the barriers to simplifying the process of getting a home loan – whether it’s the loan a consumer takes when they buy a home, or the process of improving their position by refinancing.
Around 60% of consumers take their home loan through a broker. This makes great sense: brokers offer access to a wide range of lending options and help consumers through the process of securing a suitable and competitive loan.
But we believe consumers deserve more than can be offered by a traditional broker. UNO has gone about breaking down this process and applying technology solutions to some of the tasks that are needed to secure finance. Collecting income and expense data digitally, for example, enables us to see how much a consumer can afford to repay. Likewise, being able to check identity or property values digitally empowers us to speed up what used to be very manual processes.
Barriers for consumers
What’s become apparent as we have developed our business is that consumers face a number of barriers when it comes to ensuring they acquire and stay on the best loan. For most of us, a home loan is the biggest financial commitment we ever make, and we spend a large proportion of our adult life paying it off. Our research has uncovered some uncomfortable facts about how little action most borrowers take to maintain a healthy home loan.
59% of consumers have never asked their lender or broker for a better rate since they took out their loan
For example, we found that 59% of consumers have never asked their lender or broker for a better rate since they took out their loan. We also estimate that most Australians stay with the same home loan product for more than five years. When it comes to owning property, five years is a long time. A customer’s risk profile might change, the property value is likely to fluctuate, interest rates will move up or down and new home loan products will most certainly become available in that time.
Upon releasing its Residential Mortgage Price Inquiry last year, the Australian Competition and Consumer Commission (ACCC) said, “There are many existing borrowers who remain with a lender that does not offer them the best deal and earns higher profits as a result of the loyalty of those borrowers.” Call it loyalty or inactivity, either way it’s costing Australians billions of dollars each year in interest payments, which, with a more proactive approach, they could potentially be saving.
Checking your loan
Twelve months ago, we set out to address this problem. Firstly, we wanted to create a simple way for borrowers to assess if their loan is healthy. Secondly, we wanted to be able to update them regularly on the health of their loan. UNO’s new Active Home Loan Management service is founded on acting in the best interests of home loan customers. UNO can proactively manage the home loans of Australians on their behalf, so consumers don’t have to worry about it.
Customers get regular updates on their loanScore so they can see if they could be getting a better deal, either with their existing lender or with a different one.
To do this, we launched loanScore – an innovative tool that enables customers to analyse how their loan compares to others in the market and see how much they might save if they take action to switch it. Customers get regular updates on their loanScore so they can see if they could be getting a better deal, either with their existing lender or with a different one.
In just a few months, thousands of Australians have signed up to this free subscription service. Some have found peace of mind upon learning their loan is in good shape. Others were able to quickly take action to improve their position. loanScore has also given us some incredible insight into how much Australians could save on their loan repayments and the amount of savings it generally takes to prompt a consumer to take action.
Much to gain
We’ve since deepened our research. Using UNO’s loanScore insights, and in collaboration with global consulting firm A.T. Kearney, we’ve analysed the amount Australians are potentially wasting on their home loans in unnecessary interest and avoidable fees. Conservatively, we estimate this to be $4.2 billion per year.
To put this in perspective, $4.2 billion a year is roughly half as much as we’re wasting on food – and more than double what we throw away on unused gym memberships. It also reveals a great deal about how much there is to save on home loans, if we reverse this wastage.
The UNO Household Financial Waste Report details the insights and trends we have uncovered in our analysis. It discusses how this story might unfold from here as consumers embrace technology and data becomes a powerful force for the good of borrowers.
At UNO, we’re excited about the possibility of fighting home loan waste. We believe in giving the consumer the power, so they have the option to pay the least interest possible over the life of their loan so they can enjoy their hard-earned income to the maximum. We’ll help Australians fight home loan waste today and for the whole time they have a home loan.