Seven in 10 Australian mortgage holders have not stress tested their home loan. But don’t stress, it’s much easier to do than you think.
Deloitte Access Economics’ latest report makes for pretty interesting reading.
It turns out the average Australian has a “wide-ranging hesitancy to make any sort of change” when it comes to their mortgages and other financial products.
“Why is it that educated consumers who know they’re not getting the best deal on many of their household products are so unwilling to take action to improve their household finances?” asks Deloitte.
Interesting mortgage stats
It turns out that 41% of Australians with a mortgage don’t check for interest rate changes because they either have no interest, don’t know what the RBA cash rate is, or do not see its relevance.
Even more interesting is that 68% of people say they have never stress tested their home loan.
“This is a particular worry,” says Deloitte.
“Recent estimates show that a 0.5% increase from current interest rates would cause mortgage stress to jump from one in four mortgaged households to one in three.”
Worse still, a 2% increase would throw half of all mortgaged households into stress.
Now, that might sound like a big increase, but don’t forget that it wasn’t so long ago that interest rates were at that level. In fact, it was only six years ago in June 2012.
So how do you stress test a home loan?
Calculate how much extra a 0.5%, 1% and 2% increase on your mortgage would cost you each month and whether your budget can allow for it.
If you’d run into trouble, give us a call and we can work through some risk mitigation options with you, which could include locking in a home loan rate.
Why don’t people care about getting a better deal?
Interestingly, 1 in 3 people know there are better deals out there, while 1 in 5 don’t bother to check for a better deal.
It turns out there are three key reasons people don’t change to a home loan that would see them better off financially, with the first being decision making paralysis.
“Too often, many consumers get stuck before making a choice – and then they do nothing,” explains Deloitte.
Another big reason is people “hate feeling dumb”.
“Consumers also hesitate when they fear or worry about the possibility of making a bad decision. This, coupled with the fact that people tend to avoid what makes them nervous,” adds Deloitte.
The final key reason is that people simply put it off.
“Outcomes set in the distant future typically lack a sense of urgency in contrast with everyday needs, making it easy to defer decision making to a tomorrow that never arrives,” says Deloitte.
How can you overcome these barriers?
Well, here’s the good news. We can help you overcome all three.
For decision making paralysis we can come up with a shortlist of options, reducing the choices you need to make.
Worried about feeling dumb? I bet you we’d feel pretty dumb if we did your job for a day too. But we make it our business to help educate you and bring you up to speed in this market.
And how can you overcome avoidance? Simple. Give us a quick call today and we’ll get the ball rolling for you. You’ll be surprised how little time and effort it takes.
Give us a call and we’ll ask you a few simple questions over the phone, this will take about 3 minutes. Our Brokers will then compare your current loan to over 25 different lenders to see what the most suitable loan options for you would be with the lowest rates & fees. We’ll send you an email that outlines all the options. This will either give you the peace of mind that your on a great home loan and there’s no need to change or it will show you how much you could save by switching to another loan. If you think the options to change are worthwhile exploring, we can organise a Broker to come and visit you at home after work or on the weekend. We’ll discuss the pro’s and cons of switching loans and let you know what documentation you need to provide to move forward. We’ll do all the application paperwork for you and liaise with the lender on your behalf to get the loan to completion. We’ll also stay in touch for you for the life of your loan, giving you regular updates on the changing value of your property and making sure your always on the best loan product and rate as lenders offerings and rates change over the years.
Our service is completely cost and obligation free so give us call today to get your home loan comparison.
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