Guest Blog: David Bryde – Greater Building Society
While the Reserve Bank this month dropped the official cash rate, fixed rate home loans have been coming down for a number of months. There are still some great opportunities for borrowers to lock in a rate that is lower than where variable rates currently sit.
Fixing is not for everyone but it provides certainty that you don’t get with variable rates. You won’t benefit from any further reductions in rates, but you’re insulated against any increases affecting your rate or repayment amount until your fixed term expires.
When it does expire you’ll have a choice of re-fixing or reverting to a variable rate.
What is the “Revert Rate Rort”?
If you don’t re-fix when your fixed term expires you will revert to a variable rate. You need to be aware that unless you’ve already been paying a yearly fee on your loan, most lenders don’t roll you on to their most competitive variable rate. More often than not, you’ll end up on their most expensive (standard variable) rate. Ouch!
It is unfair that an existing customer coming out of a fixed rate should be dumped onto a rate rarely sold to new customers. If you’re lucky, you may have an opportunity to convert to a cheaper variable product but it typically won’t happen unless you initiate the process and you may have to pay a fee to do so. Check these details before you sign up for your fixed rate loan. Ask your lender what rate you will revert to at the end of your fixed rate loan.
The Greater’s Great Rate Fixed Rate Home Loan and Ultimate Fixed Home Loan both automatically revert to rates lower than our standard variable rate (at no cost) should a borrower choose not to re-fix.
This is one of the reasons why the comparison rates on our fixed rate loans are usually much lower than our competitors, even if the headline (advertised) rate isn’t. Remember to always look at the comparison rate when choosing a loan. Mozo lists comparison rates as well as advertised rates.