First-home buyers overlook

Posted on 5/07/2010  

First-home buyers displayed some worrying traits when responding to a survey on what motivates them to choose a home lender.

According to Mortgage Choice, 78% of first-home buyers choose reasons other than the one they should consider - whether the home loan is "the cheapest all round".

Kristy Sheppard of Mortgage Choice says only 22% of respondents said they based their borrowing decision on whether the loan is the "cheapest all round".

The survey showed the highest proportion of respondents (37%) chose a home loan product because it was recommended to them by family, friends or professionals like accountants. And 34% said the main criterion was that the lender was offering the best interest rate at the time.

Sheppard says 33% of respondents simply took out a loan with the same institution that handles their everyday banking. Other reasons given for choosing lenders included "they were prepared to lend me the most money" (19%) and "they are a major lender and security is important to me" (18%).

"Borrowers should be very careful not to assume one lender offers more suitable home loans than another because it is bigger or perceived to be more secure," Sheppard says. "The many aspects of a home loan and the term of commitment make it a vastly more complex product when compared to an everyday banking facility." She cautions that "the same lender may not be appropriate for both".
Mortgage Choice advises first-home buyers to research multiple home loan options, including credit unions, building societies and non-bank lenders. While the interest rate on offer is important, borrowers should also consider up-front, regular and switching fees, as well as features such as offset accounts and re-draw facilities.
ENDS

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