Trillion-dollar home loans

The mortgage business is getting more competitive, and that’s good news for consumers

According to the latest Australian Bureau of Statistics figures, Australians now owe $1,170,774 million collectively on mortgages with 2.7m mortgages on owner occupied houses* and 1.7 million on investment properties**. Of the 34.9% of us with mortgages, the median mortgage monthly repayment is $1,800, which is about one third of net income in those households. If you’re one of the 29.6% who rent, on average you are paying about $1,235 a month*.

Australians use mortgage brokers for about 40% of their loans and a recent Market Intelligence Strategy Centre report using data from brokers showed that about 37% of all the mortgages they arranged in the last quarter went to the smaller regional banks such as Suncorp Group (ASX: SUN) and Bendigo & Adelaide Bank (ASX: BEN). However, the big four banks used their multi-brand strategy successfully to retain market share through lenders like St. George, BankSA, and Bank of Melbourne (all owned by Westpac (ASX: WBC)) and BankWest (owned by Commonwealth Bank (ASX: CBA)).

Suncorp in particular is singled out in the report for its performance in Queensland with incentives to borrowers through a .90% life of loan discount and incentives to brokers with improved first-year commission bonuses.

Following the recent RBA decision to cut rates by 25 basis points, very few of the lenders have passed on the full amount, but one that has is UBank (owned by NAB (ASX: NAB)), which now offers a variable interest rate of 5.82%, but only you are refinancing. If you are looking for a new mortgage, ING Direct is offering a sub-6% rate while majors such as ANZ (ASX: ANZ) and Commonwealth Bank both want 6.6%.

Foolish takeaway 

The days of having to have a long-term relationship with your bank and needing a steady savings record are long gone. A mortgage lasts for a long time and is probably the biggest expense facing you, so remember that you are the customer and shop around for a deal. Mortgage brokers play a useful part for many of us and the Internet makes it much easier to compare rates.

* source 2011 Census, ** source Australian Tax Office statistics 2009/10

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Motley Fool contributor Tony Reardon owns shares in ANZ and CBA. The Motley Fool‘s purpose is to help the world invest, better. Take Stock is The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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