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2019 is the year of financially responsible decisions. Here's why...

Last year’s trends suggest that 2019 could very well be the year Australians take control of their finances.

Lendi’s recent Home Loan Index, examining the first three quarters of 2018, showed that when it came to mortgages, an overwhelming majority of Australians were now picking principal and interest rate home loans rather than interest only.

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Owner occupiers are ditching interest only

Of owner occupier borrowers who were initially looking for an interest only loan, Lendi data showed that a staggering 85% ended up choosing a principal and interest loan instead.

But why?

Well, many potential home buyers search for interest only home loans thinking they can’t afford a principal and interest only home loan. However, it is clear that with greater education and access to choice, these customers are able to find more fiscally responsible deals that will ultimately help them become debt free sooner.

As a whole, in the first three quarters of 2018, 98.3% of owner occupied home loans were principal and interest. This is a very encouraging statistic that really drives home the fact that consumers are now realising that with so many options available, there is more likely to be a loan product better suited to their individual needs.

When it comes to property investment, interest only home loans are still popular. About a two third's of investors chose principal and interest home loans, which once again emphasises that Australians are leaning towards financially sensible decisions.

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Aussies have a healthier attitude towards debt

Another encouraging finding is that Australian borrowers are actively motivated to reduce the amount of interest they are being charged.

Lendi data shows that Australian owner occupiers who refinanced their principal and interest loans online between January and September in 2018 made significant savings. Thanks to an average 48 basis point reduction in interest, these borrowers were on course to save $2,190 in the first 12 months after switching.

Point 5 - refi motives

Banks almost never reward customers for loyalty, so it's smart to regularly shop around to see if there is a better deal available. Refinancing is becoming more popular as Australians look for deals that best meet their financial needs. It is another step in the right direction for the country as a whole to have a healthy attitude towards debt.

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We know that loyalty doesn't always pay off

Almost four in five home loans in Australia are with one of the major banks or their subsidiaries. However, Lendi’s research shows a significant amount of customers are not concerned about who their lender is, and instead look at which home loan fits their specific needs.

On Lendi's platform, less than a quarter of customers chose a home loan deal with one of the big four banks. This is indicative of a growing trend of borrowers whose primary focus is getting a home loan that makes the most financial sense to them. As a result, homeowners are less hesitant to move away from the big four banks in favour of smaller lenders who can offer lower interest rates thanks to operating with smaller overheads.

Point 2 - lender pref

So there you have it. Australians are actively educating themselves and making financial decisions that will protect themselves in the future. It emphasises how in 2019, this trend is set to continue and may truly mark itself as the year for financially responsible decisions.

Ask us anything

Our experts are here to answer your questions. Choose a time to chat with one of Lendi’s Home Loan Specialists here.

Tags: principal and interest loan, interest only, mortgage, investment property, refinance

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Important legal stuff

Lendi is the trading name of Lendi Pty Ltd (ACN 611 161 856), a related body corporate of Auscred Services Pty Ltd (ACN 164 638 171, Australian Credit Licence 442372). We will never sell your email address to any third party or send you nasty spam, promise.
# Quoted rate applies only to PAYG loans with LVR of 80% or less with security in non-remote areas. All applications are subject to assessment and lender approval.
Lendi is a privately owned and operated Australian business. Our mission is to change the way Australians get home loans by providing a faster, smarter and more secure home loan experience designed around the customer’s convenience and needs. Although Lendi compares over 1600 products (2,500+ products including feature and pricing variations) from more than 35 lenders, we don't cover the whole market or compare all features and there may be other features or options available to you. While Lendi is 35% owned by founders and employees, we have also been supported by some great minority shareholders including Bailador, Macquarie Bank Ltd and a number of Australian sophisticated investors.
*WARNING: This comparison rate is true only for the example given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. The comparison rates are based on a loan amount of $150,000 over a loan term of 25 years. Fees and charges apply. All applications are subject to assessment and lender approval. Quoted rate applies only to PAYG loans with LVR of 80% or less with security in non-remote areas. All applications are subject to assessment and lender approval.
IMPORTANT INFORMATION: Loan terms of between 1 Year and 40 Years are available subject to lender and credit criteria. Maximum comparison rate will not exceed 14.99% (see comparison rate warning above). Any calculations or estimated savings do not constitute an offer of credit or a credit quote and are only an estimate of what you may be able to achieve based on the accuracy of the information provided. It doesn't take into account any product features or any applicable fees. Our lending criteria and the basis upon which we assess what you can afford may change at any time without notice. Savings shown are based on user inputted data and a loan term of 30 years. All applications for credit are subject to lender credit approval criteria.
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