You would think that when owning property, knowing the interest rate you’re paying is a top priority when servicing your mortgage. But according to data released by Pocketbook, that’s far from the truth.
According to an analysis of 200,000 Pocketbook users, nine out of ten don’t even know what their home loan interest rate is. Furthermore, the average Australian pays up to 1.75 percent more interest on their home loan than the lowest available rate.
If we look at the average NSW home loan sitting at around $437,100 over 25 years, that means $5,405 is going straight into the banks pockets each year. Refinancing and continuing to make the same repayments on your mortgage could also see you paying it off up to five years sooner.
With interest rates sitting at record lows, Pocketbook COO Bosco Tan says Aussies should be taking advantage of them to pay off their loans quickly.
“If you look at the market before the latest RBA rate changes, the most competitively priced home loans on offer are at or below 4 per cent interest and the best big four bank rates are around 4.4 per cent,” he says.
“Meanwhile, our data shows that the average Pocketbook user is paying above 4.7 per cent, with only less than 10 per cent paying under the 4.4 per cent threshold.
“Worse still, we’ve found that the same home loan product at the same bank can have rates which vary dramatically – up to 1.75 per cent between the lowest and the highest rate.”
The majority of respondents also said they did not know if and when their bank would be passing on interest rate cuts following the RBA’s rate cut on May 4th. With mortgages taking up so much of our financial lives, Bosco is surprised at our lack of awareness.
“Given that bank interest on their mortgage is typically the biggest spend for Australians, sometimes more than 50% of total spending. It’s incredibly surprising so many Aussies were in the dark about their interest rates,” he says.
To combat the issue, Pocketbook has launched a Home Loan Insights feature to help users keep track and know the details of their loan. It will also alert them of any RBA interest rate movements.
“The idea is to put all the necessary information at the users’ fingertips so they can quickly and easily make decisions. If their rate just happens to be much higher than the one they see advertised on the bus shelter, then they would be more prompted to call their bank.” Tan said.
“Going forward, we will also be looking to introduce additional features to help users easily optimise their interest rate.”