Anxious home loan customers hit with fixed-rate lock fees to secure deals

BORROWERS are being forced to pay as much as $1000 to guarantee fixed-rate home loan in a bid to protect themselves against unforeseen rate rises.

BORROWERS are being forced to pay as much as $1000 in the fixed-rate home loan application process to shield themselves against rate rises.

Lenders are being flooded by nervous customers looking to snare cheap deals, after many banks lifted variable and fixed-rate offers across the market this month.

But some industry experts say the influx has pushed out mortgage application processing times.

Rate rises are making borrowers increasingly nervous. Picture: ThinkStock

Banks are charging customers rate-lock fees if they opt to secure a fixed interest rate at either the time of application or when the loan is conditionally approved.

This means they are immune from any further rate rises while the changeover — which can take several weeks and longer than usual — takes place.

Industry experts say recently there has been a slowing of the processing of mortgage applications — both new applications and refinancing deals.

Home loan application processing times are taking longer at this time of year and with the recent rise to many rate deals.

Home Loan Experts’ senior mortgage broker Mike Do gan said rate-lock fees vary from lender to lender and borrowers who don’t pay this could miss out on getting deals before they increase again due to the slowdown in processing times close to Christmas.

“Banks are definitely taking longer with these requests, however they are taking longer with every other request also,’’ he said.

“Borrowers could be missing out on good deals if they don’t act quickly.

“Just a couple of weeks ago the average five-year fixed rate was under four per cent.”

The Reserve Bank of Australia board kept the cash rate on hold at 1.5 per cent this month but many deals have risen across the market on all types of loans.

Data analysis by financial comparison sites RateCity shows on a $300,000 loan 30-year loan with a three-year fixed rate at four per cent, if the rate rises to 4.2 per cent before the application is processed borrowers would pay an extra $1253 over this term if they don’t lock in their rate.

In this scenario the customer would have been better off it they paid the typical rate-lock fee of $750.

RateCity spokesman Peter Arnold said paying a “lock-in” deal is an insurance policy.

RateCity spokesman Peter Arnold said paying a “rate-lock” fee will guarantee you get the fixed rate when you apply for the loan or at the time of refinancing. Picture: Supplied

“Processing applications can take a while and you could get unlucky by seeing a rate hike between the applying for a rate and the loan been funded,’’ he said.

“Whether it’s worth paying the fee depends on your loan size and how much the rate could go up, so if you are fixing a rate and you have a decent-sized loan it could be worth it.”

RateCity data shows on the average loan the average standard variable rate is 4.35 per cent and monthly repayments are $1493.

The average three-year fixed rate is 4.07 per cent and monthly repayments are $1444.

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Originally published as Anxious home loan customers hit with fixed-rate lock fees to secure deals