Australians prioritise owning a home over marriage and children
19 August 2013
Smart Savings Revealed for Home Loaners
- 3 billion in Annual Savings for those with offset accounts
- $100 a Month Extra Repayments Saves $43,000 and Almost Four Years off the Life of an Average $300,000 Loan
'The Westpac Home Ownership Report' has revealed that ‘owning a home’ or paying off your home sooner are the top priorities for 57% of Australians already with a home or planning to buy within the next twelve months, while having children and getting married rated at 8% and 5% respectively.1
This is reinforced by the fact that the majority (77%) of people surveyed believe that the true meaning of ‘Home Ownership’ is achieved only when their home loan has been paid off in full, as opposed to when they first purchase a property and take out a loan. Gai McGrath, General Manager of Retail Banking at Westpac, understands the emphasis Australians place on their dream to own a home outright.
“The Westpac Home Ownership Report reinforces how important owning a home is to Australians, and it’s striking that people are prioritising this ahead of kids and marriage. The report has also shown that Australians need advice to help them own their home sooner,” said Ms McGrath.
In response Westpac is launching a campaign to support Australians to pay off their home loans quicker and truly own their own home sooner. By considering a few simple steps such as setting up a home loan with a 100% offset account, accelerating the frequency of payments to fortnightly rather than monthly, and making additional repayments can reduce both the term of the loan and save thousands in the long-term.
“Our research indicates that many features designed to help pay off loans quicker are not fully understood, meaning Australians are missing out on opportunities to pay off their home loan faster. For example, more than one in three (37%) Australians with a home loan have an offset account, which is a great feature to offset and save on interest. However, more than one in three (36%) of those didn’t actually understand how an offset works so I doubt they are using it to their full potential. To help our customers Westpac has specially developed an offset calculator which allows Australians to work out how much time they can reduce on their home loan term and money they can save by using an offset account.”
According to Comparator's Quarterly Market Diagnostics for the Home Loans Report which represents ten of the nation’s largest home loan lenders including the four majors there is around $59 billion ($58,526,199,000) in offset balances.2
"What is remarkable is if you were to use these figures as a base and then look at the average discounted interest rate across all Banks at 5.35% those Australians are making an estimated annual savings of $3 billion ($3,131,151,647) on their offset accounts,"3 explains Ms McGrath.
“There is also a lot of confusion about the types of home loans available in the market. One in five (20%) of those intending to buy in the next 12 months had no idea what type of loan structure they should take up when they go to buy and of those who already had a home loan, over one in five (22%) didn’t even understand what a variable rate was.” said Ms McGrath.
While confusion exists, the general sentiment amongst Australians with a home loan is positive; with three quarters (76%) stating they believe now is a good time to be paying above their minimum repayments.
“The impact on making additional repayments to your loan cannot be underestimated. For example, with a $300,000, 30-year Rocket Repay Home Loan under the Premier Advantage Package at 5.28% p.a. (comparison Rate 5.67% p.a.) , will have minimum monthly repayments of $1,662. By paying an extra $100 a month, you will save three years and nine months off the life of your loan and save $43,453 in interest. If you pay an additional $500 a month you will save 12 years and save $134,036 in interest over the life of the loan.4
These small modifications can result in such a significant saving of time and money for all Australians wanting to own a home – and helping them get there sooner so they can put marriage and kids back on the agenda.”
“At Westpac we offer a range of useful tools for either those looking to buy or working through the best loan option. The Westpac Home Finder app allows you to search for properties based on what you want as well as rate, review, take photos, compare and add auction details to your phone. We also offer a homebuyers guide - great for those on the weekend home hunt,” said Ms McGrath.
Notes to Editor:
The report was conducted by Sweeney Researcher via online interviews with 1,594 Australians, including 1,057 home loan holders who are owner occupiers and 537 with the intention to buy in the next 12 months, across Australia. The research was conducted between 15th and 23rd July 2013. The sample was weighted according to census data provided by the Australian Bureau of Statistic. Variables included age, gender, state and living situation.
1 Australians who are already in property or planning to buy within the next twelve months who have not yet had children or been married.
2 For the period April to June 2013 and represent a spot balance as at the end of June 2013.
3 Bank's SVR and Discounted Interest Rate as at 2 August 2013 as per the RBA 'Indicator Lending Rates' Statistical Table 'F05hist' available under the statistics section on the RBA website.
4 Things you should know: Credit criteria, fees (including annual package fee, currently $395 p.a.) and charges apply. Terms and conditions available on request. *. You must either hold or be approved for a Westpac Choice Transaction account in order to qualify and continue to receive the benefits of the Premier Advantage Package. Premier Advantage Package Conditions of Use apply and are available at westpac.com.au/personal-banking/home-loans/packages/home-loan-package/#s1. **This comparison rate is based on a secured loan of $150,000 over the term of 25 years. Warning: The comparison rate applies only to the example given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. ©2013 Westpac Banking Corporation ABN 33 007 457 141 AFSL and Australian credit licence 233714.