Analysis reveals mortgage holders may pay triple original loan amount

A new analysis by online finance platform MNY has found that Australian home buyers could end up paying almost three times their original loan amount due to rising interest rates and administrative costs.

Key findings from the analysis include:

• Variable rates differed between lenders by up to 2.81%, with additional fees pushing the discrepancy to 2.95%
• Monthly repayments on an average $600,000 loan vary by up to $1,148
• At the highest interest rate recorded (8.94%), mortgage holders could repay $1,706,993 over 30 years on an original $600,000 loan

MNY Business Analyst Sabina Khanusiak highlighted the impact of recent interest rate rises on mortgage holders.

“There have been 13 interest rate rises in the past two years, which puts an enormous strain on mortgage holders. There is no guarantee when that will stop,” Ms Khanusiak said.

The analysis examined variable-rate home loan products across 23 lenders, including the big four banks. It considered factors such as base and comparison interest rates, monthly repayments, fees, maximum loan to value ratio (LVR), and product features.

Additional findings include:

• 52% of lenders charged upfront fees as high as $1,195
• 30% charged administration fees up to $491 annually
• 26% charged both upfront and ongoing fees
• ING charged the most fees, including upfront, annual, and discharge fees
• Qudos Bank was the only lender not charging additional fees, but had a lower maximum LVR

Ms Khanusiak emphasized the importance of understanding loan products and their long-term implications.

“Navigating home loan products and understanding the disadvantages and benefits of each can be daunting, but it is worth the effort in the long term. It could mean the difference between repaying your loan three times over, or twice,” she said.

The analysis comes amid Australia’s ongoing housing crisis and recent government initiatives to address housing affordability. The value of new home loan commitments dropped by 1.7% in May after an 18% rise in the past year.