Shopping around can save borrowers big time

RICHARD MEADOWS
Last updated 14:22 02/04/2014

Relevant offers

Money

Kiwis shrug off wet summer with overseas holidays Look twice - serving sizes on nutrition labels might be deceptive Insurance champion wants others to learn from his inspirational father Top tips to buy a house at a great price New report shows bank profits up, possible cost increase for customers Janine Starks: Here's how to achieve financial freedom Your choice: That morning coffee or a ticket to London Rob Stock: Learning from obese woman's tragic insurance mistake Health Star rating system 'may mislead shoppers' NZ Mint seals $60m export deal to China

Research agency Canstar says home-loan borrowers could save more than $90,000 over the life of their mortgages by shopping around.

The research agency's latest home-loan star ratings report compares 95 home loans from 10 lenders.

The analysis found a difference of 59 basis points (more than half a percentage point) on floating home loan rates.

Canstar calculated that difference was enough to knock $93,000 off a $300,000 mortgage over 30 years, and cut the term by more than four years.

Derek Bonnar, Canstar's New Zealand general manager, said that even in the low-interest environment, the difference between the highest and lowest floating mortgage rates worked out to $113 per month.

There were potentially much greater savings to be made if borrowers negotiated the lower rate but kept their repayments at the same level.

Bonnar said the interest rate remained one of the biggest factors affecting the cost of the mortgage over its lifespan.

"For households, keeping their repayments slightly higher when negotiating a low rate could potentially mean a fantastic overseas holiday, or retiring a year earlier," he said.

"It is well worth the effort."

While borrowers have been flocking to fix their mortgages at the attractive record-low rates of recent years, almost 40 per cent are still floating.

Those homeowners are able to freely switch between lenders without having to pay expensive break fees.

The five loan categories Canstar assessed were residential floating, residential fixed, investment floating, investment fixed, and line of credit.

The weighting for judging was 60 per cent to 85 per cent based on pricing, and 15 per cent to 40 per cent based on features of the loan, including fees, portability and security requirements.

Kiwibank was given a five-star rating in four of the loan categories, followed by Westpac, with five-star ratings in three categories.

SBS Bank achieved the top rating in both residential fixed and investment fixed, while ANZ took five stars for its line of credit product.

Bonnar said the best mortgage for each homeowner depended on their individual situation.

"But with potentially many thousands of dollars to save, taking the time to shop around is a great return on investment."

Ad Feedback

- Fairfax Media

Special offers

Featured Promotions

Sponsored Content