What to look out for

Monthly Chronicle - - Business & Personal Finance -

Be­cause of these changes, bor­row­ers need to keep a close eye on what rate their bank is charg­ing as there could be a sig­nif­i­cant dif­fer­ence be­tween what they are pay­ing, what their bank can of­fer and what is on the market.

In­ter­est only loans are gen­er­ally only avail­able for five years and then will re­vert to prin­ci­pal and in­ter­est. This can be a sig­nif­i­cant dif­fer­ence in re­pay­ments, so for ex­am­ple re­pay­ments on $500,000 over a 25 year loan term are just un­der $1,000 per month, which can be a fi­nan­cial bur­den if not ac­counted for. RBA fig­ures show that there will be ap­prox. $120 bil­lion of in­ter­est only loans re­vert­ing back to prin­ci­pal and in­ter­est over the next three years.

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