A spare cash cow

A new tool can help customers slash $14,000 off their home loan interest charges, writes SOPHIE ELSWORTH

BORROWERS aiming to pay off their mortgage sooner can now automatically tip spare change into their loans to save.

As more consumers use their card or smartphone to tap and pay, fewer Australians have leftover cash.

But for many customers, adding extra money to their home loan repayments can make a huge difference.

Research by You Gov, on behalf of ING, found 82 per cent of customers are paying more than the minimum repayments on their loans. And 45 per cent believe they will pay off their home loan five years earlier.

ING has rolled out a new tool to help customers automatically pay extra on their mortgage without even trying.

A customer’s card and phone purchases can be rounded up to the nearest $1 or $5 amount and this excess money is tipped into a customer’s mortgage.

For instance, if a customer chooses transactions to be rounded up to $5, spending $6.80 will see $3.20 rounded up and tipped into their mortgage.

ING’s head of retail banking Melanie Evans said the move would help customers save without even having to think about it.

“Now the cash is no longer circulating in society and the whole concept that physical spare change is no longer available, we are allowing customers to reduce their debt,” she said. “They can move their cash and spare change electronically.”

A customer with a $300,000 30-year home loan, who rounds up $50 worth of loose change each month, can actually shave 22 months off their mortgage and save $13,999 in interest.

This is assuming the customer started with a 20 per cent deposit.

ING previously rolled out an Everyday Round Up tool allowing customers to tip their spare change into a Savings Maximiser account and earn interest.

More than 160,000 customers have used this functionality and saved more than $32 million.

Financial comparison website RateCity’s spokeswoman Sally Tindall said anything that helped customers save on their mortgage was a good thing.

“It is a simple, easy-to-use tool to help you reduce the amount of interest you pay,” she said. “It’s great to see a bank genuinely trying to help its customers pay down their mortgage faster and potentially knock days, months and years off their mortgage.”

The Reserve Bank of Australia kept the cash rate on hold at 1.5 per cent this month – it has not moved since August 2016.

Ms Tindall said customers on an owner-occupier principal and interest home loan should be paying an interest rate under 3.8 per cent.