Home owners who fixed their rate in March, when home loan rates reached the highest rates in a decade, have been left feeling trapped after four consecutive rate cuts since September.
In March, after 13 rate rises since December 2001, many borrowers fixed their home loan rate, fearing more increases.
According to figures from the Bureau of Statistics, 43,632 borrowers
took out new fixed home loans between March and September. These borrowers are now paying the price.
But borrowers looking to refinance would come up against costly exit fees which in some cases amount to thousands of dollars.
"It's not just all about the rate," the head of Infochoice,
Shaun Cornelius, said. "There are all sorts of conditions attached
to the exit fees. They can be quite expensive."
A spokesman for the consumer group Choice, Christopher Zinn, said that many borrowers are unaware of these exit fees and are shocked to find out how much they can amount to.
The fees vary between lenders but all borrowers wishing to refinance have to pay to break their contract. The lender uses these fees as compensation for the "economic cost" of breaking the contract. It is the difference between what the borrower would have paid the lender and the current interest rate.
On Tuesday, the Reserve Bank of Australia cut official interest rates by 100 basis points, and many lenders have passed on all or part of the savings to home owners. Standard variable home loan rates have fallen from nearly 10 per cent earlier in the year, to below 7 per cent, in the past four months.
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