New research commissioned by Australian fintech Finspo has found that 54 per cent of borrowers do not know how much interest they pay on their home loan.
Furthermore, 73 per cent do not believe they are being offered the best available interest rate and fees from their financial institution, but only 21 per cent have negotiated or switched lenders for a better home loan rate.
The research, which is based on a survey of 1,148 Australians aged 18 and over throughout Australia and conducted by Lonergan Research, found that three in 10 borrowers do not think that the interest rate and fees that they pay on their financial products are substantial enough to worry about, while 28 per cent believe that all financial institutions are essentially the same, and 18 per cent believe seeking better rates and lower fees are “just too hard”.
According to Finspo, this is despite the fact that the difference in interest rates between a new home loan and one taken up four or more years ago is around 0.40 per cent per annum, which on a home loan of $400,000 would equate to around $1,600 extra in interest repayments each year.
Commenting on the survey, Finspo CEO Angus Gilfillan said: “For most Australians with a home loan, banking is their biggest weekly expense. Australians could potentially save thousands each year by banking better.
“The first step is knowing what you’re paying, and what this research tells us is that people simply don’t know.”
The survey found that 69 per cent of respondents are more aware of the cost of their utilities’ bills than the interest charged on their loans, while 83 per cent have switched their mobile phone, electricity, internet or gas provider to save money.
“We’re quicker to shop around for a cheaper mobile phone plan than we are for a lower home loan rate – even though the potential savings are much greater,” Mr Gilfillan said.
“What’s staggering is the difference between what people think their banking costs, and what it actually costs. Finspo research showed that the average amount spent by Australians on their banking was $9,502, but, when asked about it, people tend to not know or significantly underestimate this number. Not knowing what their banking costs also means Australians don’t know how much they could save.”
According to Finspo, the main reasons respondents gave for being unaware of their banking costs are because interest rates and fees are not clearly visible on their statements, and they are automatically charged, with 83 per cent believing that their financial institution should be more transparent around the interest and fees that they charge.
“With interest rates at record-low levels, now is absolutely the time for Australians to look for a better deal on their home loans,” Mr Gilfillan said.
Finspo launches new app
Along with the survey findings, the fintech, which aims to provide customers with an aggregated view of the cost of their banking, has launched its new app, which provides an overview of the true cost of a user’s banking across multiple products and providers, and insights on where users could save.
Commenting on the launch of the app, Mr Gilfillan said: “Many Australians have accounts, loans and credit cards with different banks and lenders – which means they don’t have a consolidated view of their banking. Through Finspo, users can link their accounts in one place and get a much clearer picture of their banking, and receive smart insights to help them save.
“Amazingly, more than two-thirds of Australians (71 per cent) don’t actively manage their funds to reduce fees and interest payments – for example, nearly half of Australians (46 per cent) like to have savings, even if it means they don’t pay off all of their credit card debts each month.
“When you consider that credit card interest is around 21 per cent per annum, that’s a lot of money to be paying in interest when you’ve got the available funds in a savings account … especially when savings accounts earn very little interest. Our insights will show people how they can save.”
The launch of the app has followed Finspo recently launching a mortgage broking capability within its fintech and appointing Nathan Taddeo as its chief lending officer.
[Related: Aussie refinancers opt for split mortgage]
Malavika Santhebennur is the features editor on the mortgages titles at Momentum Media.
Before joining the team in 2019, Malavika held roles with Money Management and Benchmark Media. She has been writing about financial services for the past six years.