01.Caution urged around low fixed-term home loans
Fixed-term interest rates on home loans in Australia are sitting at record lows, but prospective borrowers have been urged to consider the longer-term implications of taking out such a loan, particularly at the end of the fixed-term period.
Financial counsellors at the Consumer Action Law Centre have issued a statement reminding borrowers of the potential pitfalls that can come when the good times (and low interest rates) end – not to mention unexpected events such as redundancy, injury and illness, which can all impact on repayments.
Another worry is when banks fail to explain the implications of terminating a loan before the end of the fixed-loan period, which can result in early repayment fees.
"Mortgages are long-term financial products, and unless you take a range of financial scenarios into account you may find yourself in trouble," said Penelope Hill, Manager of Consumer Action’s MoneyHelp service. "A low fixed rate might look good now, but if the market changes over the next few years, borrowers may find at the end of the fixed period that rates are much higher, blowing their budget."
For more information on fixed-rate home loans, CHOICE has reviewed the top five fixed-rate home loans.