Offset accounts proving popular
Homeowners are ahead of the game amid cost-of-living pressures, many using offset accounts to reduce their home loan, one non-major bank says.
The annual cost of living, measured by the Consumer Price Index, jumped 5.1% in the March quarter – the biggest annual rise since 2001. Interest rates are also ramping up. The Reserve Bank of Australia lifted the cash rate 25 basis points in May to 0.35%, resulting in a flurry of increases to variable mortgage interest rates.
Having analysed its home loan customer data over the past 22 months, Bankwest said compared to 2019 there was a huge increase in the number of customers who were ahead – and how far ahead they were.
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In March 2022, more than 90% of customers were ahead on their home loan repayments, Bankwest said. The average months by which customers were ahead (around three years), increased by 45%.
Bankwest said the data showed a huge uplift in the volume of savings put into home loan offset accounts. From June 2019 to March 2022, offset account balances grew by 63% – nearly triple the rate of personal savings growth for the period of 23%.
The surge in home loan repayments was matched by a rapid uptake in home loan offset accounts, which linked to an eligible home loan, enabling households to use existing savings to reduce their current home loan balance.
Bankwest said quick account opening, an in-app self-service feature for offset accounts in the Bankwest app, appeared to help customers maximise their paydown progress.
Since December 2020, when quick account opening became available, the number of offset accounts in use has risen by 20%.
Bankwest general manager home buying Peter Bouhlas (pictured) said the bank strives to be a simple, everyday bank for people who own, or aspire to own, a home. Given current economic conditions, the figures were promising, he said.
“We’ve seen throughout the pandemic that savings balances were on the rise, and this data shows that many homeowners took advantage of low interest rates to channel those savings into paying down their home loan,” Bouhlas said.
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In hindsight, entering a period of rising inflation and interest rates, that behaviour would likely be useful for borrowers who were able to pay extra off their home loan, he said.
“We’re now seeing customers ahead on their repayments by about three years, and the growth in offset savings highlights the power of utilising all the tools available, especially with home loans offering multiple offset accounts,” Bouhlas said.
Customers unable to fortify their financial position were likely to view current cost of living pressures as a concern.
“We encourage them to get in touch with us so we can understand their individual circumstances and work with them to identify how best to support them,” Bouhlas said.
Awarded Bank of the Year at the 2021 Australian Mortgage Awards, Bankwest has the ambition to be the best broker bank in Australia.
