Checking your loan’s interest rate pays off

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

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

Uno chief executive officer Anthony Justice said it was important borrowers knew their home loan rate because it could make a huge difference in charges 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.” Figures from Uno show that, 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 the 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 tomorrow, for the first time in 2019, 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 shift rates.

In January, National Australia Bank announced it would increase variable home loan rates between 0.12 and 0.16 percentage points. This moved its 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.”