Some borrowers are reportedly being caught in a trap by banks raising their fixed rates.
Cara Giovinazzo, founder of Brisbane-based brokerage Borro, said there has been a recent slew of complaints from borrowers about banks increasing their fixed rates after they have signed up for a fixed rate offering.
“Some customers are being caught out by the big banks lifting their fixed rates and I have one client who has lodged a formal complaint after his rate was increased three times before the loan was approved,” Ms Giovinazzo said.
“He made the decision to go with that bank based on their rate, and with his settlement date approaching, he does not now have the luxury of time to change lenders, effectively trapping him.”
The last few months of 2021 saw many banks follow the hike trend for fixed rates in anticipation of a possible rate increase by the Reserve Bank of Australia (RBA).
“We have seen a frenzy of fixed rate increases by the big banks with Commonwealth Bank raising rates four times in just two months, with more than a whole percentage point added to its four-year fixed rate since the middle of October,” Ms Giovinazzo said.
Borrowers who are planning to get a fixed rate should be aware of the additional fees that come with the loan such as the rate lock fee which could cost up to $750.
“However, some banks do not allow clients to lock in the rate until loan contracts are issued,” Ms Giovinazzo said.
“With banks taking longer to assess loans, you can be subject to rate increases even before this feature is available to take out.”
Ms Giovinazzo suggests borrowers consider split loans, which would allow for a portion of the loan to be on fixed rate while the other share gets a variable rate.
“This gives them some certainty around future repayment amounts, while also allowing them the enjoy all the flexibility of the features that come with a variable loan,” she said.
Photo by @introspectivedsgn on Unsplash.