Borrowers finally taking an interest in rates
BORROWERS are building better knowledge of their mortgages as a string of interest rate changes by banks and other lenders focuses their thoughts on how much they pay, a recent study has found.
The new Loan Dolphin research has found that two out of three borrowers know what interest rate they are paying, which is a big improvement on last year when only one in three knew their rate.
The study found that the biggest improvers in home loan awareness were 25- to- 34 year olds, with 70 per cent now knowing their mortgage rate, up from 30 per cent in 2016.
LoanDolphin co- founder and CEO Ranin Mendis said the research showed a “massive improvement ” in borrowers’ knowledge and it most likely stemmed from the rush of recent interest rate moves, particularly the changes in interest- only and investment loans. “If they are paying interest only they would be quite worried and they are starting to look around,” he said. “Sometimes consumers have this ‘ set and forget’ mentality – they feel what they are currently given by their bank or broker is probably a good rate, and don’t want to go through the hassle of comparing and shopping around.”
Mr Mendis said good borrowers should demand better deals. “Don’t settle for what was given to you,” he said.
“We have seen an increase in competition among banks for owner occupier loans with a loan to value ratio of 80 per cent or less and ( customers) who are willing to repay with principal and interest.”
Mortgage and consumer finance specialist Lisa Montgomery said sharp rises in interest rates for investors and interest only borrowers had certainly caught their attention in recent months.
“That’s why we are seeing this spike in awareness, ( by borrowers) rather than owner occupiers,” she said.
“However, it’s the owneroccupiers who should be taking notice because there has been so many out- of- cycle rate changes, particularly by the big four banks, in the past 12 months.”
This meant that it was very likely that someone who had not checked their mortgage rate for a few years was now in a non- competitive loan, Ms Montgomery said.
Falling Reserve Bank interest rates since 2011 had lulled borrowers into a false sense of security, she said.
“And lenders don’t necessarily tell us what the interest rate is.
“They are telling us what the new repayment is, so they are not necessarily giving us all the information, just what they have to give us.”
Ms Montgomery said borrowers should compare their rate with others online, and demand their current provider at least match its best offer for its new customers.
“All lenders have retention teams in place and they are expecting your phone call. Sometimes it can just take a 10 minute phone call to your lender to get yourself a percentage off that loan,” she said.