New national research from AMP Bank has found that 7 in 10 (69%) homeowners with a fixed home loan component don’t know the variable revert rate they would roll onto.

The findings come as we approach the peak of the fixed rate roll-off transition period, with most fixed-rate loans taken out during the Covid pandemic set to expire¹. According to RBA figures, 880,000 loans in total are due to expire in 2023, and a further 450,000, or 20% by the end of 2024².

Other findings from the research show: 

-    1 in 5 (20%) Australian homeowners don’t know their home loan’s current interest rate

-    A quarter (26%) of homeowners don’t know when their fixed rate is due to expire

-    80% of those with a fixed component don’t know what a      ‘revert’ rate is, and 21% don’t know what a redraw facility is

-    Most homeowners keep savings in a separate savings account (54%), with less than half using an offset account (46%). 11% report using term deposits. 

The research demonstrates Australian homeowners lack understanding of key aspects of their home loan and the options available to them. For example, more than half (54%) of those surveyed indicated they don’t know how to use an offset account. 

An offset account can potentially save Australian homeowners thousands over the life of a loan if used effectively. AMP Bank’s modelling shows an offset account balance of $40,000 could save homeowners more than $170,000 in interest payments and reduce the life of a loan by three years³.

Sean O’Malley, Group Executive AMP Bank said:

“AMP Bank’s latest research has found there are many Australian homeowners who could be more engaged with their mortgages. Not knowing about key aspects of their home loan or how it works, could be costing them in the long run.

“Your home loan is probably the biggest financial commitment you'll make in your lifetime. Making some simple changes, for example maximising the benefits of an offset account can help you pay off your home loan sooner.

“It’s a reminder of the importance of checking in on your finances and making sure your home loan is fit for purpose. I encourage all homeowners take the time to understand key features and terminology of their loan, and to ask your broker or lender if you’re not sure.” 

AMP Bank expands its digital home loan to give more customers access

The findings come as AMP Bank today expands its digital mortgage offer to include an offset account.

AMP Bank’s digital application is one of the few in the Australian digital mortgage market with features including an offset account, interest only repayment options and fixed interest rates, opening the offer to more customers. Eligibility of AMP Bank’s digital mortgage will soon be broadened with self-employed income to be eligible, further to the currently accepted PAYG salary or rental income.

The online application process is a guided step-by-step experience which uses secure, automated assessment tools to provide a fast decision. AMP Bank’s online home loan application allows customers to choose between AMP Bank’s two most popular home loans; the offset Professional Package Home Loan, or the low-rate AMP Essential Home Loan.

Visit AMP Bank’s website for more information about its digital home loan.

Sean O’Malley continues:

“The enhanced capability of our digital mortgage released today strengthens AMP Bank’s position as a digitally enabled bank.

“We continue to focus on strategic investment in digital technology to simplify and enhance customer and broker experience.

“The digital application experience makes the process of getting a home loan or refinancing simpler, and in most cases, a lot faster.”

Tips to get the most from your home loan:

1. Tailor your home loan to suit you. The way you structure your home loan could help you pay less interest in the long run and take years off your mortgage. It's a good idea to find out the features of your home loan and how they work. While they might sound good in theory, they may not be what you need. Online resources like ASIC’s MoneySmart tools, and AMP Bank’s repayment and offset calculator provide helpful information and help to estimate your interest savings, and how much you can reduce your loan term, by making regular additional repayments.
2. Create an offset account. An offset account operates like a transaction account, but it reduces the interest you pay as interest is only charged on the mortgage balance less the offset account balance. If you haven’t already, check if you can link an offset deposit account to your home loan.
3. Take advantage of your redraw facility. It allows you to request to access extra repayments you might have made, on top of your minimum repayments, when you need it. So, if you have unexpected expenses or other things you need money for, it’s worth checking if you have available funds on your home loan that you could redraw. But bear in mind this could extend the life of your loan and mean you end up paying more interest in the long run.
4. Consolidate other debt into your home loan. You’ll generally find the interest rate on your home loan is lower than the interest on your credit cards or personal loans. So, if you have any debt, you could transfer this over to your home loan so that you don’t pay as much overall interest.
5. Increase your repayments and pay your home loan off sooner (if you can). Creating a budget could help you get across how much income you’ve got coming in, how much you need for the essentials and where the rest of your money might be going. This will help you identify if there’s any room for movement and if you could potentially add a little bit extra to your repayments. AMP’s budget planner calculator could help you crunch the numbers.

About the research

AMP Bank commissioned Dynata to conduct an online survey of the Australian population 18 years and over who currently hold a mortgage. Data from more than 1,000 respondents was collected in June 2023. The survey was nationally representative and conducted to understand the impact of rising interest rates, and the level of engagement Australian homeowners have with their mortgages.

¹  CoreLogic, Research news; ‘Are we there yet? A ‘fixed-rate cliff’ update’, published 10 August 2023

² Reserve Bank of Australia, March bulletin; Fixed-rate Housing Loans: Monetary Policy Transmission and Financial Stability Risks, published 16 March 2023

³ Interest saved is $173,171 and time saved is 3 years, 3 months. AMP Bank modelling is based on ABS data and using the average loan size of $725,000 for an owner-occupier dwelling in New South Wales as of June 2023. Assumptions as follows: $725,000 loan over 30-year term, variable interest rate of 6.00% pa, monthly Principal & Interest repayments, maintains $40,000 offset funds available.

The product issuer and credit provider is AMP Bank Limited ABN 15 081 596 009, AFSL and Australian credit licence 234517. Approval is subject to AMP Bank guidelines.

Information is correct as at 31 August 2023 and is subject to change without notice. Fees and charges are payable. Terms and conditions apply and are available at amp.com.au/bankterms or by calling 13 30 30.