Self employed paying 1 percent more as home loan borrowers

A national snapshot of refinance applications made to mortgage marketplace HashChing has pinpointed the suburbs in Australia where borrowers are paying the highest interest rates.

The data, which analysed more than 1,000 mortgage applicants over December 2017 and January 2017, found several suburbs in Sydney, Melbourne and Brisbane where borrowers were paying well above the average home loan interest rate.

In Sydney, the average interest rate is 4.46 per cent, however mortgagees in The Ponds, Doonside, Quakers Hill, Campbelltown and Stanhope Gardens are paying up to 7.88 percent.

The average interest rate in Melbourne is 4.46 percent, but borrowers in Blackburn, Glen Waverley, South Morang, Mernda, Narre Warren and Cranbourne are paying as much as 7.04 percent interest.

Brisbane’s average interest rate is 4.72 percent, however home owners in Coomera, Advancetown, Austinville, Labrador, Surfers Paradise, Brendale and Springbrook are paying off home loans with interest rates as high as 7.39 percent.

Mandeep Sodhi, CEO of HashChing, said one of the main drivers of higher interest rates in those suburbs was the large population of self-employed borrowers.

“The data demonstrates that mortgagees who are paying interest rates of more than 5 per cent tend to be currently or formerly self-employed.

“Previously, banks charged higher interest rates for self-employed borrowers as they were deemed riskier due to an unstable income.

"However, the market has changed, and banks have become more amenable to offering a competitive interest rate to these customers,” he said.

The average interest rate for self-employed borrowers was found to be as much as 1 per cent higher than it was for salaried borrowers.

For a $500,000 loan over a 25-year term, this can amount to paying an additional $87,383 over the life of the loan.

“Self-employed borrowers may not realise they can get a better home loan rate, especially as this information isn’t being communicated from their bank or lender.

"This disconnect is costing them tens of thousands of dollars,” said Mr Sodhi.

HashChing is a mortgage marketplace connecting customers looking for good home loan deals with experienced mortgage brokers nationwide, rated and reviewed by customers.

Since launching 18 months ago, the business has received more than $3 billion worth of home loan applications.

HashChing deals with all lenders, including non-banks, online providers, building societies and credit unions through their network of partner mortgage brokers.