Analysis: home buyers could end up paying almost three times their original loan amount

• Rising interest rates have pushed home loan rates up to 8.94% with some lenders 
• Fees are exasperating interest rates, with comparison rates differing by up to 2.95% between lenders  
• Combined, rising interest and admin fees mean home buyers could repay 2.8 times the amount of their original loan 

Mortgage holders could end up paying almost three times the amount of their original home loan1 due to rising interest rates and administrative costs, new research reveals. The analysis by online finance information platform MNY found that variable rates differed between lenders by up to 2.81 per cent with additional fees pushing that discrepancy up to 2.95 per cent. This means that monthly repayments2 on an average $600,000 loan vary by up to $1148. At the highest interest rate recorded (8.94%), that amounted to mortgage holders repaying $1,706,993 over 30 years on an original loan amount of $600,000. 

The findings come amid Australia's ongoing housing crisis, with housing affordability becoming a major focus of this year's Federal Budget3. The Government committed $6.2 million to housing initiatives, including $1.9 billion in concessional loans to community housing providers. After an 18 per cent rise in the value of new home loan commitments in the past year, the value dropped by 1.7 per cent in May4.  

To help home buyers make an educated choice about their home loan, MNY analysed variable-rate home loan products across 23 lenders, including the big four. The analysis considered base and comparison interest rates, monthly repayments based on a $600,000 loan over 30 years, upfront, ongoing and exit fees, maximum loan to value ratio (LVR) with lenders mortgage insurance (LMI) and product features such as redraw facilities, split loans and the ability to pause or make extra repayments. See the full analysis here: https://mny.com.au/home-loans/impact-interest-rate-australian-mortgages/. 

How to minimise additional home loan costs 

While additional costs can't be eliminated, an understanding of the types of loans available and the fine print of those products can help home buyers minimise excess mortgage expenses.  

MNY's analysis found significant variations in interest rates, fees and features, all of which have an impact on total repayments. Even at the lowest rate and least amount of fees, mortgage holders will still repay double the amount of their original loan.  

Across those analysed, 52 per cent of lenders charged upfront fees as high as $1195. Almost a third (30%) charged administration fees up to $491 annually, and one quarter (26%) charged both upfront and ongoing fees5.  

ING charged the most fees, incorporating upfront, annual and discharge fees. Qudos Bank was the only lender not to charge additional fees, but its maximum LVR (with LMI) was 80 per cent compared with 95 per cent with other lenders.  

For a loan of $600,000 with a maximum LVR of 80 per cent, home buyers would need $120,000 upfront. For a maximum LVR (with LMI) of 95 per cent (65 per cent of lenders), home buyers would need a significantly lower deposit of $30,000 on a $600,000 loan. 

MNY Business Analyst Sabina Khanusiak says: "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. Buying a home is the biggest financial commitment most people will make and the interest rates and associated fees can make all the difference to how much mortgage holders will ultimately repay and whether those repayments are sustainable over the life of the loan. 

"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. That is a significant difference on a $600,000 loan." 

MNYs full analysis can be found here: https://mny.com.au/home-loans/impact-interest-rate-australian-mortgages/. 

1 On a 30-year loan term 

2 All repayments referred to in this analysis are monthly. 

3 https://budget.gov.au/content/02-building-homes.htm 

4 https://www.abs.gov.au/statistics/economy/finance/lending-indicators/may-2024#housing-finance-detailed-