Ditch those old habits that cost you money

When it comes to personal finance, there is usually a cost. In some cases it’s the cost of doing nothing.

A 2020 survey showed people continue to buy brands they distrust as long as they personally gain from the relationship – whether that’s because of loyalty, status or inertia.

People know they can get cheaper loans or better returns elsewhere, but they stay with their provider through inertia or a perception that it’s too difficult to change.

And they are not totally wrong, particularly with mortgages. While brokers can help you find a better mortgage, there are forms to complete and information to provide. You may need to change direct debits and or credit card limits – it can be hard work.

Start by checking how much you’re paying. That will help you decide whether it’s time to look elsewhere.

According to Mortgage Choice, apathy is increasing, with fewer Australians knowing their rate in 2020 compared with previous research (61.5% in 2018 and 71% in 2016). In fact, only 46.5% of respondents knew their interest rate.

AMP research from late 2020 found almost half of all Australians are feeling financial stress, which has been exacerbated by the pandemic.

Mortgage Choice chief executive Susan Mitchell says research shows Australians are more focused than ever on their finances, yet many are complacent about their biggest expense and potentially biggest saving.

“In the past year alone, the cash rate has dropped by 0.65% and many lenders are open to negotiating on rate reductions,” she says.

“Let’s say your principal and interest rate is 3.99%, and shopping around with the help of a mortgage broker enables you to drop by 0.5% to 3.49%. On a 30-year home loan of $600,000, the savings could be around $170 a month.”

Homeowners aged 30 to 39 were the most likely to not know their interest rate (64.5%) while those aged 5059 were close behind at 56.4%.

As for reviewing their home loan, 13.7% said they never did, while 44.4% said they reviewed it every couple of years. Only 41.9% checked it annually.

The start of a new year is an ideal time to think about your financial habits, and checking your mortgage could be a good habit to pick up.