According to Gateway Banks' 2018 Mortgage Holders’ Sentiment Report, overall understanding of common home loan terms is down from 2017. Around half of respondents to the annual report indicated they were aware of the terms redraw facility (down 4 per cent to 56 per cent this year), home loan insurance (55 per cent) and offset account (down to 53 per cent from 56 per cent in 2017).
The most significant decline was in Australian mortgage holders grasping the difference between a comparison rate and an interest rate. Just 31 per cent of those surveyed were aware of the term, down from 36 per cent in 2017.
There was also a dip in the number of people with an understanding of the terms lenders mortgage insurance (40 per cent), loan to value ratio (26 per cent) and portability (20 per cent).
The only area where knowledge improved was in an awareness of split home loans, which saw a 1 per cent increase to 34 per cent of mortgage holders understanding the term.
The survey also found that many home loan holders did not know features of their current mortgage. This included 40 per cent of mortgage holders being unaware if their home loan offered splits, 17 per cent lacking an understanding of whether they had access to a redraw facility and 19 per cent not knowing if their current home loan offered an offset account.
Overall, financial literacy levels in men were better than in women across all terminology.
Paul Thomas, CEO of Gateway Bank, said he was concerned Australians were missing out on finding and utilising the best deals and packages the market has to offer.
“As with any purchasing decision, meticulous research and awareness is required if you’re to nab the best deals for your particular circumstances. People will invest hours or days of research into purchasing a television or a computer, and the same amount of interest and time investment needs to be implemented when making one of the largest purchasing decisions of any one’s lives,” he said.
Mr Thomas said the onus was on the home lending sector to ensuring financial literacy and education are promoted throughout the home loan process.
“Banks and brokers alike need to make it a priority to ensure that clients and members are given the resources and support needed to ensure they have a high level of understanding of the inclusions, exclusions and terms associated with their mortgages,” he said.