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Between January and October 2024, brokers using fintech platform Sherlok saved clients a record $84.5 million in interest costs despite the cash rate having remained steady.
Mortgage broker retention platform Sherlok has released its Home Loan Interest Insights Report: November 2024, revealing that brokers using its platform have saved clients a total of $84.5 million in interest costs, averaging $972 in annual savings per home owner.
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Sherlok leverages AI and open banking to help brokers identify opportunities and reprice and refinance existing clients.
According to the Insights Report, the highest annual interest savings achieved for a single client were $34,789, which was for an owner-occupier loan with principal and interest repayments on a $2 million loan with National Australia Bank (NAB). Large savings were also had by clients with the Commonwealth Bank of Australia and ANZ.
Indeed, the data showed that the biggest repricing rate reductions came from larger loans (with over $1 million in outstanding debt and a loan-to-value ratio below 80 per cent).
A total of 1,897 borrowers saved over $1,000 in interest over the 10-month period, while 26 clients having saved more than $10,000 a year. Notably, Sherlok found that the 26 clients had both large and smaller loans (four clients had loans with balances between $500,000 and $820,000, for example).
The savings achieved between January and October of this year mark a new record for Sherlok brokers and come even though the cash rate has remained steady at 4.35 per cent for the past year.
However, the average rate reduction achieved from lenders was lower this year – dropping to 0.34 per cent – down from 0.46 per cent, according to the fintech.
The median interest rate for owner-occupier loans came down to 6.25 per cent once repriced through Sherlok, but the lowest rate achieved was 5.78 per cent. Eight clients saw their rates reduce by over 2 percentage points, highlighting the disparity in front book/back book pricing.
Commenting on the findings, the CEO of Sherlok, Adam Grocke, highlighted the importance of taking immediate action, saying: “Australians don’t need to wait for the RBA to make a move. Brokers have the tools to help clients secure significant savings today by repricing their loans with their current lender.
“Our latest report shows how brokers are delivering real financial benefits to Australians, putting money back in their pockets when they need it most.
“The data clearly shows that if clients don’t monitor their interest rates, they are highly likely to be taken advantage of by their current lender and end up paying too much interest.
“With interest rates almost certain to move in 2025 (up or down is anyone’s guess), mortgage brokers and their clients have an opportunity to get on the front foot, start tracking their rates and reprice to a lower rate.”
RateTraker automatically repricing
The findings come hot on the heels of the launch of Sherlok’s open-banking powered solution, RateTraker.
The solution – which officially launched in September – allows home owners to link their home loan via open banking and have their loan ‘rated’ by comparing it with like-for-like mortgages in market with a score out of 10.
If the rate is low, clients can request a rate review via the platform, which will automatically process a reprice with their current lender to lower the interest rate via their broker.
According to Sherlok, the first client to receive a RateTraker rate saved over $7,000 in annual interest costs.
Of the loans linked so far, Sherlok RateTraker said Bank Australia loans are the best rated, with an average rate rating of 9.7. Bank Australia’s median interest rate is 6.19 per cent, according to Sherlok. Major bank ANZ, meanwhile, was in 17th place with a rating of 6.5 (and a median interest rate of 6.39 per cent).
Grocke said: “Brokers connecting clients to Sherlok RateTraker (powered by open banking) now get alerted when the rate is too high so that can deliver immediate savings to their clients.”
Rehan D’Almeida, CEO of Fintech Australia, welcomed Sherlok’s contribution to borrowers, saying: “Sherlok’s report clearly shows why the Consumer Data Right is vital for Australia’s lending industry. It demonstrates how consumers are punished for their loyalty when it comes to lending.
“Crucially, it shows how further integration of the CDR in this industry could have real cost-of-living implications for mortgage holders. We commend Sherlok for bringing such a key consumer issue to light.”
You can hear more about Sherlok in The Adviser’s In Focus podcast from July 2024, here:
[Related: In Focus: How automation can revolutionise client retention]
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