Australians are realising why comparing home loans matters
New KPMG data shows we're taking more time to weigh our options and seek better deals.
Here's one of the small frustrations of working for a comparison site: most people realise in theory that it's a good idea to compare what's available before they get a new home loan/travel insurance cover/broadband service (delete as applicable). In reality, inertia frequently kicks in, and we end up sticking with what we've already got because it "seems easier", even though we might end up spending more in the long run.
So we choose to get our electricity and gas from the same supplier without researching the cost difference, or settle for a contract plan for our mobile even though buying outright and choosing a month-to-month contract can be cheaper. (If you're curious on the later point, our Mobile Plan Finder will show you exactly what the difference is for any given phone, by the way.)
Pleasingly, there's evidence that for home loans at least, the sands are shifting. A recent study of 600 Australian professionals by KPMG found that we're becoming keener both to compare rates before we take out a loan, and also to renegotiate the rates on those loans on a regular basis, or seek a better deal elsewhere. Amongst survey respondents, 41% of people said they would seek to renegotiate rates within five years, and that figure rose to 56% for customers who took out their loans through a mortgage broker.
KPMG's study focuses on what it describes as "mass affluents": people earning between $70,000 and $250,000. That said, average weekly earnings in Australia were $1,533.10 in November 2016, or just under $80,000 a year. While the two figures are not precisely comparable, that does suggest the trend doesn't exclusively apply to the ridiculously well-off.
Rate cycles for home loans are becoming less predictable. When the Reserve Bank last dropped the official cash rate in August 2016, many banks only passed on part of the cut. Out-of-cycle rate changes are also becoming more common. You can't take advantage of those changes if you don't shop around.
Housing affordability remains a big concern in Australia, and whatever measures emerge to address it are going to be one of the most interesting features the 2017 budget. Regardless of what Canberra proposes, however, one of the few areas where potential homebuyers retain some degree of control is in the mortgage they choose. Don't squander that chance by lazily sticking with your existing financial institution without comparing first.
Angus Kidman's Findings column looks at new developments and research that help you save money, make wise decisions and enjoy your life more. It appears Monday through Friday on finder.com.au.