Low interest rates have seen home loans hit a record level of $32.7 billion in April, figures from the Australian Bureau of Statistics show, but despite the growth in mortgage financing, many Australians don't understand their home loans. A recent survey from industry super fund-owned bank, ME, found that only 41 per cent of Australians are confident they know enough to have the right home loan for their situation. For those aged 18 to 29 years old, the rate is a worryingly low 15 per cent.
“We were particularly surprised that older generations of Australians – those who typically have more exposure to home loans – have low levels of home loan literacy," said Patrick Nolan, ME Head of Home Loans. "Only 43 per cent of 30 to 49 year olds and 51 per cent of those aged 50 and over were confident with their home loan choices, far lower than anticipated." Nolan said he’s amazed more Australians don’t understand common home loan features like offset accounts or package loans that could help them save them money.
Despite the survey being conducted just days after the last RBA rate cut, 42 per cent of those surveyed couldn’t correctly state the current RBA cash rate, and more than a third of respondents were unsure if the cash rate affected how much homeowners pay back on their mortgage. The over 50s were the most knowledgeable with just 28 per cent missing the mark, but almost half (42 per cent) of those aged 30 to 49 and 70 per cent of those aged 18 to 29 were in the dark about the cash rate.