Mozo’s comparative analysis of 525 home loans from 88 lenders found that the average borrower can save $2,596 a year on repayments by switching to a competitive online lender.
This is up by 15.4 per cent from the $2,250 in potential annual savings recorded a year earlier by the financial product comparison site.
Mozo director Kirsty Lamont said that the increase in potential savings indicates that online lenders have been “competing more fiercely in the home loan space”.
The director additionally noted that online lenders are on average 0.73 per cent cheaper than the major banks for a typical loan of $300,000 over 30 years. This translates to a reduction of $1,541 in interest per year.
However, Mozo’s study also showed that Australians are less likely to apply for a home loan online compared to other financial products.
More than 50 per cent of borrowers are comfortable applying online for car insurance, credit cards and personal loans, while only 27 per cent would consider taking out a home loan online.
“Many borrowers are missing out on thousands of dollars in cost savings each year because they think there is a trade-off between great value and security. In fact, online lenders are covered by the same industry bodies as bricks and mortar lenders,” Ms Lamont said.
“For those looking for a better value home loan, the huge savings on offer make for a compelling reason to look beyond the traditional bricks and mortar lenders.”
Despite the study showing some reluctance among consumers towards purchasing home loans online, a number of online lenders have been ramping up their innovation efforts to strengthen their value proposition and boost conversions. Marketplace lender Zagga, for example, recently launched a dedicated introducer portal that enables real-time loan processing for intermediaries, such as brokers.
Zagga CEO Alan Greenstein said during the launch that as the lending landscape shifts and the banks continue to tighten credit criteria, there is a huge opportunity for trusted intermediaries to help borrowers access loans through alternative lenders.
“Intermediaries play a vital role in helping to educate creditworthy consumers about the alternative options available to them and helping to find a finance solution that meets their needs,” the CEO said.
Meanwhile, UBank built a customer-facing chatbot to guide customers through the home loan application process. The implementation of RoboCHAT boosted the NAB-owned bank’s application completion rates by 15 per cent.
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Tas Bindi is the features editor on the mortgage titles and writes about the mortgage industry, macroeconomics, fintech, financial regulation, and market trends.
Prior to joining Momentum Media, Tas wrote for business and technology titles such as ZDNet, TechRepublic, Startup Daily, and Dynamic Business.