What is an introductory loan?
Some lenders will offer home loans with a particularly low interest rate for a short period at the beginning of the loan term - to attract borrowers. Also known as a honeymoon rate, this rate generally lasts only for around 12 months before it rises and reverts to standard variable rates.
What are the pros and cons?
- Usually the lowest available rates
- Significant principal reductions can be made during the introductory rate period by paying an increased instalment
- Some lenders provide an offset account against these loans
- Payments usually increase after the introductory period