Prospective borrowers struggling to grasp mortgage concepts

Westpac’s latest Home Ownership Report, which involved a survey of 1,479 home owners and first home buyers (FHBs), almost half of prospective home buyers – or next home buyers (NHBs) – do not understand key mortgage concepts such as comparison rate (70 per cent), equity (49 per cent), offset account (48 per cent), or refinancing (41 per cent).

The survey revealed that only 43 per cent of respondents considered themselves “financially confident”.

However, according to Westpac’s research, 84 per cent of NHBs are taking steps to better educate themselves in preparation for a home loan, with 73 per cent turning to professionals, and 40 per cent leveraging digital resources to enhance their understanding of home-buying concepts.

“It’s encouraging to see the majority of home buyers are already making the most of available resources to get up to scratch on key home loan concepts,” Westpac’s general manager of home ownership, Will Ranken, said.

“However, more can be done to ensure Australians are fully equipped to achieve their home ownership goals.

“With the right help and guidance, the process of buying a home can be incredibly rewarding. It all starts with an open and frank conversation with a professional to identify any knowledge gaps.”

Westpac’s research also found that many NHBs are apprehensive about purchasing a home at an auction, with over half (56 per cent) claiming they are “too scared”, and 46 per cent conceding they are “not confident they know what to do”.

Mr Rankin noted the importance of preparing for the auction process, particularly in light of recent CoreLogic data, which reported a rise in the number of homes taken to auction, with clearance rates holding above 50 per cent for the first time since September 2018.

“Auctions can be daunting, but again, by doing their homework and being well-prepared, home buyers can feel confident to make the most of current opportunities,” Mr Ranken continued.

“To ensure the best chance of success, home hunters should observe several auctions before they bid, thoroughly research the property they’re interested in, and ask the selling agent for comparable sales.”

Mr Ranken also encouraged NHBs to consider the financing options available to them before committing to purchasing a property.

“A portability loan can be a great time-saver, particularly when already dealing with the emotional stress that can come with moving home,” he said.

“A bridging loan could also be an option if they want to stay in their current property while they build a new home.”

[Related: Less than a tenth of Millennials are investing in property]