Tracker loans may be the latest buzz thing touted by the financial regulators but the major banks aren’t really buying the idea, and nor does it seem are many women.
According to a survey of 930 Australians by financial product comparison site finder.com.au, only one in three people would be interested in a tracker loan if offered.
Interestingly tracker loans were slightly more popular with men at 35 per cent, compared to only 28 per cent of women.
The idea behind tracker loans is that if you have a home loan with a variable interest rate, any movement orchestrated by the Reserve Bank of Australia is then followed in lock step the by provider but kept within a certain range.
Currently, it is at the discretion of provider whether they pass on the RBA’s moves in the official cash rate – which stands at 1.5 per cent – a record low – well below the comparable variable rate mortgage of around 4 per cent.
So why might this be the case?
While we know that women make the bulk of consumer purchases and financial decisions affecting the home front, they also tend to be more conservative than men when it comes to taking risk and indeed trying something new.
This could be the reason why many women aren’t immediately warming to the idea of tracker loans.
But that certainly doesn’t mean the survey results won’t change in the future, the more women have time to research the idea – an investor trait women are known for.
Earlier this month Australian Securities and Investments Commission chairman Greg Medcraft said tracker loans would help foster competition in the home lending market, but the majority of the major banks disagreed.
Tracker loans are common overseas but not in Australia where we have our major banks and loan providers offering interest rates that whilst competitive are based on their choosing and take into account what’s needed to covers their operating costs and importantly what’s need to keep them profitable.
In the Australian market Auswide Bank has launched a tracker loan with an interest rate of 3.99 per cent to owner-occupiers with a deposit of more than 20 per cent of the home’s value.
While the rate is lower, it really is’t that out of step with many of the loan products already offered in the Australian market.
Still even a small improvement in the interest repayments on a home loan can make a difference to the overall mortgage size and term.
On a $440,000 mortgage that’s held over 30 years, the difference between 3.99 per cent and 4.5 per cent is a monthly saving of about $140, and it would be slightly more if you made weekly repayments!