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Borrowers paying $4.2bn in mortgage interest ‘waste’

Mortgage-holders are wasting approximately $4.2 billion annually in “unnecessary” interest costs, according to new research.

According to online brokerage uno Home Loans’ Household Financial Waste Report, developed with data and insights from A.T. Kearney and CoreData as well as findings from uno’s loanScore data, Australians are wasting billions each year on “avoidable” costs, including $4.2 billion in avoidable interest on mortgage repayments, more than $1 billion on standby energy costs, $550 million in bank exception fees and $9 billion on food waste.

Reflecting on the excess mortgage interest costs paid by borrowers each year, uno Home Loans CEO Anthony Justice commented: “Most home owners purchase or refinance their home feeling confident they’re on a good rate – and they usually are.

“The cracks only begin to show a few years down the track, by which time consumers no longer think about their home loan as something they should be fighting to get a good deal on.”

The uno research also found that 53 per cent of borrowers don’t know what their current interest rate is, with more than half (59 per cent) conceding they have never asked their bank or broker for a better rate on their home loan.

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Moreover, almost eight in 10 (78 per cent) respondents said they have never discussed strategies for paying off their loan faster. 

uno launches new tool 

The online brokerage has created a new tool that it has said would help address the issues identified in its research.

Uno’s new Active Home Loan Management service has been launched, designed to proactively manage a borrower’s home loan on their behalf.

Mr Justice told Mortgage Business that the new service, powered by the loanScore platform, allows borrowers to review and assess their existing home loan within a couple of minutes, by providing them with a score out of 100, which provides them with an indication of the potential savings they can make, either by renegotiating with the existing lender or by switching to another lender. 

He added: “The second phase is to alert the customer. We’ll send the customer an update once a month, and we’ll also allow them to set a threshold, which serves as a trigger, so if we can find a deal that overcomes that threshold – so if they say to us they want to save over $5,000 over the next three years and we find a deal that can do that – we’ll send them an alert to let them know we’ve found them a deal that can do that.”

If a client is satisfied with the deal proposed by the platform, uno then provides them with access to a broker who would then renegotiate the deal with their existing lender or switch their loan to another provider.

The service is available to both existing uno customers and the broader market.

[Related: Banks urged to release borrowers from ‘mortgage prisons’]

Borrowers paying $4.2bn in mortgage interest ‘waste’
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