Bathurst Blog

The typical Aussie homeowner is wasting $900 every year on payments they could have avoided, with the wastage totalling billions, new research shows.

Aussie property owners are wasting about $900 a year on unnecessary home loan payments by failing to seek out a better rate.

The financial waste totalled an estimated $4.2 billion annually, with NSW homeowners accounting for just over a quarter of the unnecessary spending, according to a report from Uno Home Loans.

The report revealed home loans were one of the key drivers of financial waste for Aussie households, dwarfing the costs of unused gym memberships and standby energy costs — the electricity drained by appliances not in use.

More than $1.8 billion was spent on unused gym memberships, $1 billion on standby energy costs and $550 million in bank exception fees.

Only the total costs of food wastage was higher than wasted home loan spending at $9 billion.

Uno Home Loans CEO Anthony Justice said homeowners often failed to take action on sub-par home loans thinking they were on the best rate they could get.

“Most homeowners purchase or refinance their home feeling confident they’re on a good rate — and they usually are,” Mr Justice said.

“The cracks only begin to show a few years down the track, by which time consumers no longer think about their home loan as something they should be fighting to get a good deal on. ... Basically, they’ve got a set and forget approach to their loan.”

Rates that may have been competitive at the start of the loan often deteriorated due to changes in interest rates, the value of the property or the introduction of new lending products, Mr Justice said.

An issue prevalent in Sydney was for homeowners to have substantially more equity in their properties due to the pace of price rises in recent years, he added.

NSW homeowners stood to make the biggest savings in the country by seeking out a better loan, according to the Uno study, compiled with Core Data and A.T. Kearney research.

NSW mortgagees who switched to a better loan could reduce their payments by an average $1300 a year.

Victorian home loan customers could save an average $1200, while in Queensland the savings were $1000.

“Over time, it is easy for even some loans that were excellent deals at the start to become a source of major financial waste,” Mr Justice said.

Most homeowners never sought to improve their deals because they didn’t take an active approach to their home loan, he added, pointing out that more than half of loan customers surveyed said theydidn’t know what their current rate was.

An even higher number, close to 60 per cent, said they never asked their bank or broker for a better rate on their home loan, while almost eight in 10 never discussed strategies for paying off their loan faster.

Mr Justice added that it was easy for homeowners to be complacent since most banks were more effective in communicating deals to new buyers rather than existing customers.

ABS research showed refinancing activity has been declining in recent years. The number of owner-occupied finance commitments, excluding refinancing, decreased by 0.5 per cent over May — the 21st consecutive month of decreases in activity.

Homeowners Wayne and Christine Braiding said they realised they had an opportunity to get significant savings on their loan by refinancing their Gymea home after a major rebuild project.

“Banks were only communicating to us rate rises, we never got told about new rates that could help improve (our costs),” Mrs Braiding said. “We were also asking ourselves: ‘why aren’t we getting the same deal as new customers?’

“I guess over time it is easy to get complacent with your loan and what you’re paying,” Mrs Braiding said.

Uno Home Loans recently announced a new Active Home Loan Management service, which uses technology to analyse the market daily and alert customers there is a deal worth switching to. The service is available at no cost to existing uno customers and the wider market.

Originally published as Mistake costing homeowners $900 a year

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