The Lendi Borrower Confidence Report - January 2020

The Lendi Borrower Confidence Report surveyed 2,500 Australians, revealing consumer attitudes and the shifting dynamics of the Australian home loan market. The sample of Australian adults included 1,355 property owners (owner occupiers and investors) and 1,145 non-owners. The survey was completed online in Q4 2019.

Key findings - Mortgage product and pricing

• 38% of all people surveyed, 48% of property owners and just 26% of non-owners, think it would be easy to identify which home loan products they quality for.
• 42% of Australians surveyed, 53% of property owners and a mere 29% of non-owners, think it would be easy to identify the most competitive mortgage option.

Key findings - Application process

• 62% of people believe it has become more difficult to get a home loan application approved in the last 12 months. 65% of property owners and 59% of non-owners.
• 41% of people did not realise applying for credit can negatively impact their credit score. That’s 41% of property owners and 42% of non-owners.
• 51% either had, or were unsure if they had, ever inadvertently impacted their credit score in a negative way. That’s 47% of owners and 56% of non-owners.

Key findings - Bargaining power

• 77% of people (79% of property owners and 75% of non-owners) think banks have the most power in the home loan market when compared to customers and brokers.
• 77% of people (and 72% of property owners and 83% of non-owners) think this is balance of power is unfair.
• 47% of Australians surveyed knew that borrowers with a variable rate can try to negotiate a lower interest rate with their lender at any time. That’s 57% of owners and 36% of non-owners.
• 79% of respondents ( 81% of owners and 78% of non-owners) would switch banks for a better deal.
• 36% of Australian property owners surveyed have refinanced to reduce the amount of interest they pay on their loan.

Key insights - Confusion not apathy impacting home loan customers

Lendi’s Borrower Confidence Report shows the traditional status quo continues to thrive in the Australian home loan market as borrowers fail to exercise their right to negotiate. But it’s confusion not apathy which is holding borrowers back.

According to the Report, only 57 per cent of homeowners surveyed knew they could try to negotiate better variable rates with their lender at any time.

Furthermore, although 81 per cent of homeowners say they would switch banks for a better deal, only 36 per cent had ever refinanced to reduce the amount of interest they pay.

When asked about the distribution of power between banks, brokers and borrowers, 77% of Australians surveyed said they believed banks had the most power and they felt this was unfair.

Lendi co-founder and managing director, David Hyman, comments; “The majority of Australians believe the distribution of power in the home loan market is unjust yet so many borrowers haven’t actualised their own power by bargaining or finding a better deal.

“With more than 80 per cent of homeowners saying they would switch banks for a better deal but only one in three ever having refinanced to save on interest, there’s clearly a disconnect between intentions and actions.

“It’s not apathy that is paralysing borrowers. It’s a lack of transparency in the market which blocks action by making it hard for borrowers to understand what their options are. The fact that more than one in two Australians don’t know they can negotiate with a lender is clear evidence of this.”

The research shows only 38 per cent of all people (property owners and non-owners) surveyed think it would be easy to identify which home loan products they quality for. Additionally, less than half (42 per cent) of Australians surveyed think it would be easy to identify the most competitive mortgage option.

It’s not just the products creating confusion amongst consumers, it is also processes involved in applying for finance. The survey revealed 41 per cent of people did not realise that applying for credit can negatively impact their credit score and 51 per cent either had, or were unsure if they had, ever inadvertently impacted their credit score in a negative way.

Hyman adds, “The incumbent industry has profited from the lack of transparency which has typically kept borrowers in the dark about their finance options and the approval process behind it.

“Like our newly launched Approval Confidence™ rating, there is new technology coming to market which will help clear the way for more transparent processes and pricing policies from lenders.

“The various inquiries into the banking sector have helped fuel a greater awareness amongst consumers of their rights and in turn their expectations are changing.

“At Lendi, we are hoping to raise the bar with new technology that makes it easy for people to understand the range of options available to them so they can make better informed decisions about what best serves their interests.”

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The information in this post is general in nature and should not be considered personal or financial advice. You should always seek professional advice or assistance before making any financial decisions.