- Comes as packages have been announced to support those impacted by lockdowns
- Last year, 493,440 home loans were deferred
- The value of the loans paused was $245.4 billion
While many major banks have announced support packages for customers in light of recent lockdowns, analysis conducted by Mozo.com.au has found that some hardship options could add significant amounts to overall mortgage debt.
An example was an owner-occupier paying principal and interest on a $400,000 will add $39 to their monthly loan repayment if they take a 3 month mortgage holiday, resulting in $3,250 to their total loan amount.
Additionally, the analysis found that extending a home loan from 25 to 30 years might save $262 in monthly repayments, but it will add an extra $41,761 to total loan costs.
At the peak of loan deferrals last year, the Australian Banking Association reported 493,000 home loan customers had their repayments paused – the loans totalled some $245.4 billion.
Reducing repayments to the minimum monthly amounts could cost $11,730 on an average $400,000 loan over 30 years.
“While our big banks should be congratulated for acting quickly to help assist mortgage customers in financial difficulty, it’s important to do the numbers before you lock in a loan deferral,” says Mozo spokesperson Tom Godfrey.
“While some home loan customers may be forced to take a loan deferral, reduce their monthly repayments or extend the length of their loan, something as simple as comparing loans and switching to a better deal could save you thousands a year without having to increase your debt.”
Tom Godfrey, Mozo
Emphasising the importance of researching loans, Mozo’s analysis said the average big bank variable rate was 3.53%.
Interestingly, the Reserve Bank is set to meet for their (almost) monthly meeting next week which will only be days after it turns off its pandemic term funding facility, which was crucial in underpinning hardship support to banks that ultimately helped home loan customers.