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Borrowers increasingly unsure of home loan terms

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Reporter 5 minute read

Australian borrowers are more unsure of home loan terminology now than they were two years ago, according to a new research from Gateway Credit Union.

Gateway’s Mortgage Holder Sentiment Report 2017 has found that Australians with a mortgage are now more uncertain of what their home loan includes than they were in 2015.

The data, gained through a quantitative survey of 1,030 people conducted through an online panel from 12 to 18 September 2017, found that a fifth of respondents (20 per cent) were unsure if their current mortgage offered a redraw facility, almost a third (28 per cent) were unsure if they had an offset account and nearly half (47 per cent) were unsure if their home loan offered splits.

The findings showed a marked increase in uncertainty on home loan features, with the previous survey (in 2015) showing that 17 per cent of respondents were unsure of redraw, 18 per cent were unsure if they had an offset and just 35 per cent were uncertain over splits.


More alarmingly, the research went on to reveal that borrowers also struggled when it came to understanding common home loan terms.

Forty per cent of borrowers did not understand the term “split home loan” (up from 28 per cent in 2015), 32 per cent did not understand the difference between interest rate and comparison rate (up from 21 per cent two years ago), while 18 per cent did not comprehend the term “offset account” and 14 per cent did not understand “redraw facility” (up from 13 per cent and 10 per cent, respectively).

Gateway chief customer officer Lexi Airey said that the current expectation that interest rates will increase next year means that “there is an opportunity cost for borrowers who don’t know what features they have available with their home loans”.

“A home loan is a significant financial commitment and it seems many people are entering into it blindly and under-utilising their loan facilities, and potentially missing out on saving thousands in interest over the life of their loan,” Ms Airey said.

“In the current environment — when we hold high levels of household debt, have easy access to credit and property prices across the nation are elevated — it’s never been more important to have strong financial capability.

“There is a lot of jargon surrounding home loans which can cause confusion. However, there are easy ways that Australians can boost their understanding.”


Ms Airey concluded that while friends and family can offer “tips and hints” based from their own experience, financial planners and advisers can provide “professional in-depth advice and guidance”.

[Related: ‘A third of IO borrowers don’t know they have an IO loan’: UBS]

Borrowers increasingly unsure of home loan terms
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