Inertia costs Aussies thousands
A third of Australians believe it's too time-consuming and costly to switch banks, new research shows.
Nab-owned UBank surveyed more than 1000 Australians and found that around 40 percent do not even know the interest rate they are paying on their home loan.
Alex Twigg, UBank's general manager, said Australians remained apprehensive when it comes to shopping around for a better home loan deal.
"The apathy syndrome is about not investing time or effort because it's all too hard," he said. "The reality is switching is really simple, it's really quick and you can make really big savings fast."
Michelle Hutchison, spokeswoman for financial comparison website RateCity, said if you're thinking that it's all too hard to switch and not worth it financially, some simple math should change your mind.
"The average of the big four banks' standard variable home loan rates is 6.82 percent. One of the lowest rates on the market right now is 5.62 percent. So if you had a $300,000 home loan and switched from the higher rate to the lower one, you could potentially save around $222 in monthly repayments and more than $66,600 over 25 years," she said.
Mortgage and Finance Association of Australia chief executive Phil Naylor said borrowers contemplating switching are often unsure whether they can get a better deal elsewhere.
"I think the real issue is where are you going to switch to," he told News Ltd.
There are thousands of home loan products to choose from over 100 lenders, which can be confronting for borrowers, according to Hutchison.
"That's why the federal government introduced the home loan facts sheet initiative, a standardised document detailing information about the mortgage from the interest rate, fees and features to the total cost of the loan. Or you can do it all online at a comparison site such as RateCity," she said.
Comparing home loans can simply be a way to negotiate a better rate with your existing lender too, she added.
"Take your research back to your lender and ask for a better deal. If you can show that you're serious about taking your business elsewhere your lender will take notice, and if they can't reduce your rate then consider switching because by now you've already done much of the hard work," she said.
Since the ban on home loan exist fees, switching your mortgage is simpler. But beware that there are still some costs involved with establishing a new home loan, on average these costs are around $700.
"But even after some loan set-up costs, you'd be well ahead inside the first year – so if you need to spend a couple of hours researching home loan options, then a few days negotiating and doing the paperwork, that's probably the best return on your time you'll see all year."
Housing affordability getting worse
Five steps towards a financially secure future