76% of bank’s customers ahead on home loans shows it’s easier than you think

Posted: 3 March 2021 5:13 pm
News
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Less than 12 months since hundreds of thousands of borrowers rushed to put their mortgages on hold due to the pandemic, some Aussies are paying more off their home loan than ever before.

New data has revealed that Greater Bank's customers are getting ahead on their loans, with more than three-quarters of borrowers currently at least one month in advance on their repayments.

"Customer research that we undertook in November last year highlighted that paying off their home loan sooner was our customers' number one financial priority," said Scott Morgan, Greater Bank's CEO.

It's a priority that many have been making big progress on.

Data shows that in the 5 years leading into the start of 2020, 71.5% of all Greater Bank home loan customers (on average) were more than 1 month in advance on their home loan repayments.

But as of 31 January 2021, this figure had risen to 75.9% of the bank's 32,000 home loan customers being more than 1 month in advance on their home loan repayments.

"While COVID-19 placed financial stress on many customers, it also provided an opportunity… for many to actually improve their financial position by paying more off their home loan," Morgan said.

"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."

With the prospect of interest rates staying low for the foreseeable future, Australians have a real opportunity to get ahead financially by repaying their home loan repayments as if a higher interest rate applies.

For instance, if you were in the following situation:

  • $500,000 loan, principal and interest over 30 years
  • Interest rate was previously 2.99%
  • Repayments were previously $2,105 per month

And you negotiate with your bank or refinance to a cheaper mortgage deal, so you're now paying just 1.99%, your situation transforms as follows:

  • $500,000 loan, principal and interest over 30 years
  • Interest rate is now 1.99%
  • Repayments are now $1,845 per month

You could pay the lower amount and enjoy the extra $260 in your pocket each month.

Or, you could continue paying your mortgage off at the amount of $2,105 per month. If you did this from the first month of your new 30-year loan term, you would save $28,360 in mortgage interest and own your home outright almost 5 years sooner.

With interest rates so low, there's never been a better opportunity to get ahead in your finances, adds Andrew Irvine, NAB Group Executive Business and Private Bank. He said the Australian economy is faring much better than expected, with a rebound from the recession that is tracking well ahead of expectations.

"By mid this year, we're expecting the economy will be back to pre-COVID levels – 18 months earlier than we initially predicted a year ago," Irvine said.

Pay off your property sooner with a cheaper home loan, or check out some of the best cashback deals on offer.

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