In the wake of the Reserve Bank rate cut, COSL has urged caution for borrowers considering fixed rates.
Credit Ombudsman Raj Venga has warned borrowers to be wary of break costs on fixed rate home loans. Venga said COSL has, from time to time, experienced a "surge in complaints" from fixed rate borrowers locked into loan facilities while variable rates drop.
"Although fixed rates are often seen as a way of reducing the risk of rising interest rates, borrowers should be aware that they may incur substantial break costs in a falling interest rate environment. Break costs can and do sometimes run into tens of thousands of dollars," Venga said.
Venga cautioned fixed rate borrowers to ask their lender for an indicative pay-out figure including break costs, and to be aware that the figure could change over time, depending on when the loan was paid out. He said borrowers should "weigh up carefully" whether or not to chase a lower variable rate in light of fixed rate break costs.
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