Younger mortgage holders shop around as cost of living bites

New research by MyState Bank has found over two in five (43%) mortgage holders have looked for a better home loan deal in the last six months; Millennials and Generation Z are leading the charge for a better deal (50%) compared to Generation X (37%) and Baby Boomers (31%).

Commissioned by MyState Bank, the research conducted by YouGov* of Australian mortgage holders found those living in NSW and VIC are more likely than those in QLD and WA to have looked for a better deal for their home loan in the past six months from their existing mortgage provider (32% and 31% compared to 20% and 16% respectively).

The study also concluded that women are more likely than men to say they haven’t looked for a better deal for their home loan in the past six months and have no plans to do so (27% compared to 18%).

Tim Newman, General Manager, Home Lending, MyState Bank said with many younger homeowners maturing out of fixed rate periods it’s not surprising they’re leading the charge to a better deal.

“Generationally, the banking industry’s youngest customers, those facing the greatest financial shock after a steep climb in interest rates, are the most active when switching their home loans.”

“In contrast, Baby Boomers, with smaller mortgages, are more likely than the younger generations to say they haven’t looked for a better deal for their home loan in the past six months and have no plans to do so (38%, compared to Millennials/Gen Z: 16% and Gen X: 23%).”

“Among those who looked for a better deal in the past 6 months on their mortgage, a third (34%) or the equivalent of 1 million Aussie mortgage holders stated that no one could match the deal they are currently on."

For those mortgage holders who have looked into getting a better deal on their home loan or plan on doing so in the near future, just over half (53%) are confident that they would be able to refinance their current home loan(s) for a better deal. While two in five or the equivalent of 2.8 million mortgage holders say they are not confident.

Mr Newman said mortgage holders should do some research to fully understand the differences between lenders.

“While the interest rate is important, ensure the product and lender you select can meet all of your needs,” Mr Newman said.

“Be aware of any fees and costs associated with refinancing, including any discharge fees from your existing lender - as these can quickly erode any savings you achieve with a lower rate.”

When it comes to savings buffers, Mr Newman said despite accumulating healthy savings during the pandemic, one in five (20%), the equivalent of 1.4 million Australian mortgage holders, said they have no savings buffer to service their mortgage.

“Australians are clearly tightening their budgets and cutting back on non-essential spending, but the lack of savings buffer among some borrowers is of real concern.”

“The combination of interest rate rises and the cost of living has depleted household savings, and younger generations are among the hardest hit,” Mr Newman said.

The YouGov research of 1009 Australian mortgage holders 18+ found the average savings buffer was 4.4 months.

Other key findings of MyState Bank’s Cost of Living survey of 1009 Australian mortgage holders included:

• Over three in five (62%) Australian mortgage holders hold mortgage(s) with a variable interest rate, while one in five say they have a fixed interest rate (20%) and a combination of a fixed and variable interest rate (19%) on their mortgage(s).
• Four in five (80%) Australian mortgage holders say the rising cost of living is impacting their ability to service their mortgage, with nearly a third (32%) who say it's having a big impact.
• Younger mortgage holders (Millennials + Gen Z: 84%) are more likely than Gen X (77%) and Baby Boomers/Silent (75%) to say the rising cost of living is impacting their ability to service their mortgage.
• Those living in NSW are more likely than those in QLD to say the rising cost of living is impacting their ability to service their mortgage (85% compared to 73%).
• Less than half (43%) of Australian mortgage holders have looked for a better deal for their home loan in the past six months, including one in four (27%) who looked to their existing mortgage provider and similar proportion (24%) looked to a different mortgage provider.
• A further third (35%) say they plan to look for a better deal for their home loan in the near future and just over one in five (22%) say they have no plans to do so.
• Those living in NSW and VIC are more likely than those in QLD and WA to have looked for a better deal for their home loan in the past six months from their existing mortgage provider (32% and 31% compared to 20% and 16% respectively).
• Of those that searched for a better deal: two thirds (66%) of Australian mortgage holders are receiving better deals on their home loans, including over half (52%) that are taking them up, while 15% say they never acted on it.
• Of those who searched for a better deal: A third (34%) or the equivalent of 1 million Aussie mortgage holders stated that no one could match the deal they are currently on.

*YouGov was commissioned by MyState Bank to conduct this research. The study was conducted online between 8-13 November, 2023 and comprised a national representative sample of 1009 Australian mortgage holders 18+ . The data was weighted by age, gender and region to reflect the latest ABS population estimates in Australia.