July 14, 2016
HOME loan customers are getting gouged on their interest rates by signing up to enticing honeymoon deals that revert to much higher rates once the introductory period expires.
Alarming new findings by financial comparison website RateCity found some customers are paying as much as 1.5 per cent extra once the honeymoon offer ends on variable rate loans.
More than two dozen lenders have more than 71 home loan offers with introductory variable rates and some start as low as 3.29 per cent for a six-month period before reverting to 4.79 per cent.
On a $300,000 30-year home loan this could result in monthly mortgage repayments being an extra $256 per month, the site’s spokeswoman Sally Tindall said.
“These deals are basically a marketing gimic to get customers sucked into a longer-term deal,’’ she said.
“Some of the lenders are happy to take a small hit upfront and they are banking on the fact that you will stay a customer for a number of years if not the life of the loan.
“It’s also a trap for first home buyers who are looking to get into the market desperately and aren’t thinking long term.”
She suggests customers look at the comparison rate which is a truer cost of the loan and includes all the fees and charges.
Mortgage Choice spokeswoman Jessica Darnbrough has warned customers that while honeymoon rates seem attractive it is important for borrowers to “look beyond the initial interest rate and read the fine print.”
Many variable and home loan interest rate deals are below the four per cent.
Although the RBA announced to keep rates the same, its believed the RBA are doing this to watch how the market reacts.
“They would rather wait another month and see how the dust settles with Brexit and the election outcome before deciding what it will do,’’
We expect a cash rate cut in August and November.