Greater Bank notes trend in early repayments

The customer-owned bank has revealed that its customers are paying off more of their home loan than ever before, with figures showing that 75 per cent are now more than one month in advance on repayments.

While the COVID-19 pandemic saw many Australians change their spending habits during 2020 as a result of uncertainty regarding employment and their overall financial future (and amid reduced discretionary spending due to movement restrictions), borrowers have been increasingly utilising their reduced expenditure by paying down their debts.

Indeed, Treasury figures have previously shown that deposits into savings accounts grew by more than $100 billion in the 12 months to the end of November alone.

During that same period, NSW-based lender Greater Bank said it saw an increase in customer home loan repayments, which also aligned with the availability of flexible repayment options on home, business and personal loans.

In the five years leading into the start of 2020, on average, 71.5 per cent of all Greater Bank home loan customers were more than one month in advance on their home loan repayments. This number had remained steady during that period until the last 12 months, the bank said.

However, as at 31 January 2021, 75.9 per cent of Greater Bank’s 32,561 home loan customers were more than one month in advance on their home loan repayments.

Due to record low-interest rates and fewer repayment restrictions, borrowers are reportedly finding value in paying additional money off their home loan as opposed to depositing into savings accounts, the bank suggested.

Greater Bank revealed that customers with a $300,000 Ultimate Variable Home Loan over 30 years could save $16,051 and reduce the term of their loan by two years and 11 months by paying an additional $20 a week off their loan.

The bank’s chief executive, Scott Morgan, commented: “Customer research that we undertook in November last year highlighted that paying off their home loan sooner was the number one financial priority for our customers.

“For 75 years, Greater Bank has been helping people from the Hunter [region] to realise their dream of owning a home. It’s the foundation of the financial institution and something we want to help people achieve sooner.

“While COVID placed financial stress on many customers, it also provided an opportunity for us to work closely with those affected to ensure they remained financially secure through the pandemic, but also for many customers to actually improve their financial position by paying more off their home loan.

“On the back of recently released, record-low home loan interest rates, customers continue to be well positioned to reduce both the interest payable and term of their loan, and realise their dream of owning their home sooner.”

The figures come as Australia nears the expiry of COVID-19 support packages, including repayment deferrals.

According to data from the Australian Prudential Regulation Authority (APRA), temporary loan repayment deferrals due to the coronavirus pandemic totalled $51 billion worth of loans as at 31 December 2020, approximately 1.9 per cent of total loans outstanding.