 Think before you cancel your fixed rate
Fixed loan break costs have risen dramatically in the past few months as variable interest rates keep falling.
Break costs have surged so much that home loan experts are warning against quitting your fixed-rate mortgage. Since September these break fees have risen from a few thousand dollars to as much as $30,000.
Smartline Personal Mortgage Advisers principal Cathy Anderson says homeowners on a fixed rate shouldn't feel like they are missing out as six months ago people happy on a 7.5 per cent fixed rate when everybody else was on 10 per cent. However, Ms Anderson understands that some households are really hurting.
"The speed and extent to which rates have dropped over the past five or
six months is really hurting people who have a fixed-rate loan,"
"Break costs that might have been $5000 or $10,000 late last year
are now more likely to be $20,000, $30,000 or $40,000 on an average
$250,000 loan,'' she said.
Mortgage Choice senior corporate affairs manager Kristy Sheppard
said lenders had different formulas for working out break cost, which are designed to recover their cost of having to re-sell
the money at lower current levels.
Home loan experts say borrowers should not panic, and instead do their research and seek advice.
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