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A new survey by super fund-owned bank, ME, has revealed that the majority of Australians have little understanding of home loans and how they operate.
According to the survey, only 41 per cent of Australians are confident that they know enough to have the right home loan for their situation, with the number decreasing to 15 per cent in those aged 18-29.
Head of home loans Patrick Nolan said the statistics also showed surprising results for the older generation.
“Only 43 per cent of 30- to 45-year-olds and 51 per cent of those aged 50 and over were confident with their home loan choices – far lower than anticipated,” he said.
According to the survey, there was also confusion surrounding interest rates.
Despite the survey being conducted just days following the last RBA cut, 42 per cent of participants couldn’t correctly state the current cash rate.
In addition, 37 per cent of respondents were unsure if the cash rate affected how much home owners pay back on their mortgage, while a further 10 per cent thought it didn’t have any impact at all.
Distinguishing the different types of home loans proved difficult for many people.
According to the survey, 58 per cent had no understanding of a packaged home loan, while 53 per cent had no understanding of a split/combination home loan.
The survey also found that 45 per cent of participants had no understanding of an interest-only home loan, compared to 41 per cent who had no understanding of a basic variable home loan.
Another finding was that 36 per cent had no understanding of a standard variable home loan and 28 per cent had no understanding of fixed home loans.
“The fact that a large proportion of Australians don’t understand the value of fixing a portion of their home loans is a concern – it’s a great time to lock in record-low home loans rates, so people could be really missing out,” Mr Nolan said.
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