The Australian Competition and Consumer Commission (ACCC) released a report in December 2020 which found that many Australians with older home loans were potentially thousands of dollars out of pocket.
The report found that many borrowers could have saved thousands had they sought a better deal from their current lender or moved to a different lender. The report suggests there is a reluctance amongst Australian mortgage holders to change lenders with many borrowers being with their current lender for a significant number of years.
Despite the potential savings on offer the Home Loan Price Inquiry report identified a number of factors that impacted a borrower when they looked for a better deal. The report identified a 3 stage process when borrowers might consider switching; 1. Deciding to look for a better offer, 2. Obtaining information and comparing offers, and 3. Taking action when they have decided to make the switch. The report suggests that at every stage of the process, borrowers face difficulties in making a switch.
Borrowers find it hard to get accurate and transparent information from different lenders. The information they often find can be difficult to understand. This makes changing lenders time consuming and many borrowers just give up.
With other pressures faced during 2020 many borrowers may not even realise they are paying significantly higher interest rates than they could be in the marketplace. They may be aware of news of record low interest rates in the marketplace and assume that their lender has already passed on these discounts. This is often not the case.
The Report recommends that the Government should look at regulation to make the process of switching easier. This means both getting a better rate from your current lender and seeking to switch to a new lender. They don’t want to see a situation where borrowers who have been with the same lender for a significant period of time are treated differently to those who may be walking in to take out a new loan.
Lenders aren’t incentivised to make change easy and this report makes recommendations that will benefit consumers.
In making the process easier, and by checking your mortgages more regularly, there are other added benefits for consumers. By seeking a better rate you may also be able to unlock extra equity in your property. This could give you the opportunity to build wealth through growing your property portfolio.
It’s worth checking out.
If you’d like a hand checking out if you’re paying too much, or you’re in a mortgage unsuitable for your needs, don’t hesitate to reach out to us today.