Borrowers unaware of mortgage interest rates but know subscription costs

Borrowers chasing cheaper home loan deals are about to hit some serious roadblocks. Here’s how to ensure you’re getting the best mortgage deal possible and are on the best rate.

Mortgage customers hunting down a competitive home loan deal will find it much more challenging in 2019 as Commissioner Kenneth Hayne hands down the final report into the financial services royal commission today.

Tightening lending restrictions have put pressure on lenders to flex their muscles and scrutinise mortgage applications much more closely.

Lenders have continued to move interest rates both up and down and experts say borrowers must be on top of their fees and charges as deals continue to fluctuate.

MORE: Is now the best time to fix your home loan interest rate?

MORE: Another bank hikes variable home loan rates

But a new analysis by online mortgage broker Uno Home Loans found despite a mortgage being the biggest expense many of us will ever deal with, only 47 per cent of borrowers know their home loan interest rate.

Consumers are more aware of much smaller costs including their grocery bill (81 per cent) and entertainment subscriptions (70 per cent), it found.

Uno’s chief executive officer Anthony Justice said it was important borrowers knew their home loan rate because it could make a huge difference in the charges they paid over their loan term.

“Knowing your home loan rate is important to be able to manage your finances effectively,” he said.

“Australian consumers need to get a good understanding of whether or not they are on a good deal.”

All mortgage customers should know the rate they are paying on their loan.

Figures from Uno show on a $300,000 owner occupier principal and interest loan the lowest variable rate is 3.66 per cent and monthly repayments are $1406.

This is well below median variable home loan rate of 4.77 per cent with monthly repayments of $1597.

While interest rates are moving in both directions, the Reserve Bank of Australia board will meet for the first time in 2019 tomorrow and is expected to keep the cash rate on hold at 1.5 per cent.

The cash rate has not moved since August 2016 but lenders have continued to move rates.

In January National Australia Bank announced it would increase variable home loan rates between 0.12 and 0.16 percentage points — this moved their standard variable rate for owner occupiers paying principal and interest to 5.36 per cent.

Rising Tide Financial Services managing director Chris Browne urged borrowers to pay attention to their mortgage rate.

“A small saving on your bank interest rate is remarkably easy to negotiate, plus a 10 basis point discount will save you approximately $350 per year,” he said.

“Banks rely on your apathy so they can maintain their incredibly high profits, so it is critically important to review your loan every 12 to 24 months to make sure your interest rate remains competitive.”

@sophieelsworth

HOME LOAN HACKS

• Check the fees and charges.

• Chase an interest rate with a “3” in front.

• Use an offset/redraw account.

• Pay fortnightly or weekly, not monthly.

• Make extra repayments.

Originally published as Borrowers unaware of mortgage interest rates but know subscription costs