83% Aussies with home loans not taking advantage of falling rates
Despite the historic low interest rates, a surprisingly large number of Australians are not taking advantage of the favourable environment. According to a new research by Yellow Brick Road, 83% of Aussies with a home loan have not refinanced in years.
The survey reviewed the situation of 1000 Australians who got their home loan more than two years ago. 40% of the people surveyed admitted that they have never refinanced at all.
Mark Bouris, Executive Chairman of Yellow Brick Road, said that he found it hard to believe that so many people were avoiding action, particularly in light of well-publicised historically low interest rates and the potential savings available.
“It’s outrageous to think people are still paying high interest despite the opportunity to pay less. In effect you’re just handing the banks extra money. Many people take the time to drive to the cheaper grocery store just so they don’t pay an extra dollar for milk, yet when it comes to home loans they stick their head in the sand,” he said.
The current interest rates in Australia are at their lowest point in over 50 years. RBA data shows the benchmark 2% interest rate is significantly lower than the average of 5.13% that Australians experienced between 1990 and 2015.
According to Mr Bouris, even after taking potential fees and transfer costs into account, households can secure monthly savings by switching their home loan.
“For those who took out a home loan five years ago, the average rate after reductions would be 5.3%. The potential savings on an average $350,000 loan with 25 years remaining could be thousands,” he said.
“For example, if you refinanced to a rate of 4.8%, you would save $30,660 in interest over the remaining life of your loan.”
According to the survey, the main reasons for not refinancing were:
Not believing enough money would be saved in the process (31%)
Thinking the fees and charges would outweigh the benefits (29%)
Perceiving the process as too much of a hassle (18%)