Caution needed when securing home loan rates, Ombudsman says

Thursday 17 November 2011

Article by Mozo

Australia's Credit Ombudsman has warned people looking for home loans to be careful when committing to a fixed rate.

Caution needed when securing home loan rates, Ombudsman says

Raj Venga believes that "unusually cheap fixed rates" offered in September have enticed more people to latch on to this type of deal, the Sydney Morning Herald reports.

Indeed, the number of fixed-rate loans being taken out in September stood at 7.9 per cent of all loans, compared with just 5.6 per cent in August.

Ms Venga suggested that while fixed-rates are often seen as a good way of protecting yourself against rising interest rates, they can have consequences. Although exit fees have been outlawed, providers can still sanction break costs if a borrower opts to leave early.

"Break costs can and do sometimes run into tens of thousands of dollars," she told the news provider.

Mortgage Choice recently advised Aussies not to adjust their home loans repayments despite the recent reduction in the cash rate announced by the Reserve Bank of Australia.

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