Cheap fixed rate mortgages could bite back
HOME buyers are snapping up heavily discounted fixed-rate mortgages at a record level, but there could be an expensive sting in the tail for many borrowers.
Dubbed the ‘‘revert rort’’, many fixed home-loan rates jump by up to 2 percentage points as soon as the fixed period is over, with many borrowers automatically switched over to some of the most expensive loans on offer.
According to financial comparison company Mozo, switching back into the most expensive variable rate loan can add an extra $100,000 to total repayments.
With the current crop of fixed rates at 4.99 per cent, the number of borrowers locking in mortgages has tripled since December, Mozo director Kirsty Lamont said.
‘‘What most borrowers don’t realise is that most lenders don’t roll you on to their most competitive variable rate,’’ Ms Lamont said.
‘‘Lenders are counting on borrowers to be lazy.’’