One in two home loan customers don’t know what interest rate they are paying

Millions of Aussie mortgage customers are frittering away tens of thousands of dollars by failing to know what interest rate they are paying. Here’s what you need to do.

Millions of mortgage holders are dudding themselves massive savings because they don’t know what interest rate they are paying.

Despite home loan rates falling to record lows – some start with a “1” – about 46 per cent of borrowers conceded they were flying blind when it came to their charges.

However this has improved significantly from 2016 when 71 per cent of borrowers didn’t know their rate.

New independent research from Mortgage Choice showed 62 per cent were more concerned about money because of COVID-19 and 66 per cent were doing their utmost to try to save more.

Builder Ben Kohonen, 34, wife dance school principal Emma, 40, from Collaroy Plateau on Sydney’s Northern Beaches, recently refinanced their three-bedroom home and now have about $900,000 in borrowings including their mortgage.

“We didn’t really know what interest rate we were paying and once it was fixed it was just something that was there and we let it be,” Mr Kohonen said.

“We’re hoping to be mortgage free by the time we’re in our mid to late 50s as opposed to when we’re in our 60s and 70s.”

Ben Kohonen, 34, wife Emma, 40 and children Quade, 8, and Abbie, 6, recently refinanced their home loan to save. Picture: Tim Pascoe

The couple’s fixed-rate loan recently expired at 4.1 per cent and they are now about to fix a portion of their loan for three years at just 1.89 per cent and leave some borrowings on a variable rate of 2.64 per cent.

The couple also received $2000 cashback for switching from ANZ to Commonwealth Bank.

Mortgage Choice broker James Algar said, “it’s never been more important for customers to know what rate they are paying”.

“We still get owner occupiers who walk in the door and are paying a rate with a four in front,” he said.

“Provided they don’t have a high-risk loan, if they have a 20 per cent deposit they should be chasing a variable rate in the mid two per cent range and if it’s fixed it should be in the low two’s.”

Figures from MoneySmart show on a $300,000 30-year loan, a borrower who switches from a rate of 4 per cent to 2.5 per cent will save $48,300 over the loan term.

Financial comparison website RateCity’s spokeswoman Sally Tindall urged borrowers to take action in the new year to nab a better deal.

“Anyone who hasn’t refinanced or renegotiated their loan in the last 12 months could be getting a raw deal from their bank,” she said.

“Right now there are 51 lenders offering at least one fixed rate below 2 per cent, including three of the big four banks,” she said.

“Check your rate against two things – what your bank is offering new customers for exactly the same loan and what other lenders are willing to offer you if you refinanced.”

Ms Tindall said borrowers should be reviewing their loans annually.

@sophieelsworth

Originally published as One in two home loan customers don’t know what interest rate they are paying