The rate trick catching our unsuspecting home loan customers
Mortgage customers need to pay close attention to their home loan deals because they could easily get stung with this hefty increase to their monthly costs.
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Exclusive: Complacent mortgage customers could be getting slugged by much higher costs when their fixed-rate period ends.
Some deals see the revert rates — when the fixed period finishes — climb by a staggering two per cent.
On a typical 300,000, 30-year loan this could mean the customer’s repayments jump by an additional $340 in charges per month if they do nothing when the fixed period ends.
Nearly half of all mortgage products have revert rates that are higher than the fixed rate.
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Alarming analysis by financial comparison website Mozo found some of the worst revert rate deals include:
• Suncorp: One-year fixed rate loan — climbs from 3.84 per cent to 5.77 per cent (a 1.93 per cent increase) for loans under $150,000.
• Bank of Qld: One year discount fixed rate under privileges package — climbs from 3.64 per cent to 5.38 per cent (a jump by 1.74 per cent).
• HSBC: One-year fixed rate home loan — climbs from 3.7 per cent to 5.33 per cent (a jump by 1.63 per cent).
Aussie Home Loans’ chief executive officer James Symond has warned borrowers to keep a close check when their fixed-term finishes and to take immediate action.
“It is essential to stay on top of your interest rate especially coming up to the end of a fixed rate period,” he said.
“The variable rate that you revert to differs from product-to-product and lender-to-lender but can be substantially higher than the best variable rate available in the market.”
Many financial institutions have deals in the mid three per cent range and experts say customers should be pouncing on these deals.
Mozo’s spokeswoman Kirsty Lamont said lenders must notify customers when their fixed rate term comes expires.
“Few people do check their rates once the fixed period ends,” she said.
“If you do nothing you automatically switch to the bank’s standard variable rate and those rates can be extremely uncompetitive.”
The Reserve Bank of Australia board kept the cash rate on hold at 1.5 per cent this month but despite this lenders continue to massage their rate deals.
Online mortgage broking market place LoanDolphin’s chief executive officer Ranin Mendis said many lender’s standard variable rates are more than five per cent, which is the rate customers typically default to once the fixed period ends.
“Lenders generally send out communications via snail mail and other means to alert about the fixed rate expiry to the respective borrowers prior to its expiry,” he said.
“So it’s good to be on top of it early on, start shopping around and be prepared to engage with the lenders and ask for a competitive rate.”
Originally published as The rate trick catching our unsuspecting home loan customers
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