Home Loan Hacks & Unsung Heroes: How Aussies Could Save Over $100k

Today, leading financial comparison website Mozo.com.au has released its 2024 Home Loan Report, which shines a light on the unsung heroes of the home loan market, and reveals how Aussies could save over $100,000 by checking a few key home loan features.

“In the wake of the most aggressive rate hiking cycle since the early 1990s, some Aussies are paying upwards of a thousand dollars more a month to cover their mortgage,” said Mozo’s personal finance expert, Rachel Wastell.

“As the Reserve Bank of Australia isn’t set to cut rates until later this year, homeowners are understandably concerned with how they’ll manage repayments”

“However, Mozo research shows more than half are unaware of critical home loan features that could save them thousands.”

Concerned yet unaware: 2 in 5 don't know their rate

Mozo’s “Home Loan Hacks & Unsung Heroes” report found 75% of Aussie mortgage holders are openly concerned about their repayments, yet 56% don’t know either their interest rate, the type of home loan they have or what their loan-to-value ratio (LVR) is.

Shockingly a  whopping 2 in 5 people (42%) admitted they didn’t know their home loan interest rate. 

"Buying a home is one of the biggest investments you’re likely to make, but after so many rate hikes, Aussies are finding it difficult to stay on top of the changes, with 2 in 5 admitting they don’t know their home loan rate," Wastell said.

"Australians are essentially pouring thousands down the drain by not knowing their home loan rates. It's like driving with your eyes closed.“

However, Wastell remains optimistic that this lack of awareness signals an opportunity for Aussies to save thousands by making a few simple changes.

"The rise in interest rates may be hitting homeowners hard, but there are ways to ease the burden, and that starts with understanding your loan."

Mozo research showed 1 in 5 (20%) hadn’t compared their interest rate since taking out their home loan, and that this cohort had a home loan rate 0.38% higher than those who compared every 6 months.

“If you’re struggling with repayments, the first thing to do is check the interest rate that you’re on, have a look at what other rates might be available to you, and see how much you could save by switching.”

“A home loan is decades of debt, and interest on home loans is calculated daily, so even the smallest difference in rates can save you hundreds of dollars a month.”

“Borrowers should also check the less obvious but very impactful changes they can make, like increasing how often they pay, which could save them over one hundred thousand dollars in interest over a 25 year loan term.”

Mozo analysis shows on a loan of $500k over 25 years at a rate of 6.82%, switching from 12 monthly repayments of $3,477 to 26 fortnightly payments of $1,738.50 equates to a saving of $111,050 over the life of the loan.

'Unsung Home Loan Heroes' saving Aussies thousands

"In the face of rising rates and a cost of living crisis, it's imperative that mortgage holders keep an eye on interest rates, and remember there are alternative options beyond the major banks,” Wastell stressed.

The report, completed as part of the 2024 Mozo Experts Choice Awards for Home Loans, revealed that borrowers who opted for lenders outside of the Big Four banks could save roughly $436 per month in repayment costs.

“The 2024 home loan winners list reveals that fintechs, regional banks and credit unions are the unsung heroes of home loans, and that borrowers who shop small could see substantial savings." 

In Mozo’s analysis of over 475 home loans from 99 lenders, customer-owned banks emerged as clear frontrunners, comprising 63% of the winning providers, followed by online lenders (24%).

Wastell emphasised the need for Australians to just “have a look” at their home loan and compare it with others on the market.

“The key to unlocking any potential home loan savings is to face your finances head on and have a look! There are millions of Aussies out there who are not looking right now, which suggests billions of dollars in savings are likely being overlooked.”

“Be aware of what you are currently paying, look at what others are paying, and make sure you’re using features like offset accounts to reduce interest payments.”

Mozo's Home Loan Hacks

Mozo’s Home Loan Report 2024 not only identifies the top performers but also offers practical insights and hacks to empower homeowners to make informed financial decisions. 

1. Look Beyond the Big Banks: By exploring alternatives to the Big Four banks, borrowers could save an average of $436 per month, according to Mozo analysis.
2. Bank with an Offset Account: Using an offset account as an everyday account and savings account could save homeowners $284 per month 
3. Compare Your Rate Regularly: Comparing home loan rates every 6 months could result in an average saving of $118 per month.
4. Increase How Often You Pay: Halving your monthly payments and making those payments every fortnight will slightly increase the amount you repay each year, but could save you $111,050 over the life of the loan.
5. Consider a Split Rate Loan: Split rate loans offer stability and potential savings, so you can “hedge their bets” against RBA cash rate moves.
6. Earn Income From Your Home: Renting out your garage could generate an additional $400 per month, that you could put towards your mortgage.