Borrowers wooed by falling fixed rates could find themselves in a precarious position when their term expires, Canstar Cannex has said.
As lenders make deep cuts to fixed rates, the research company has stated that there is a mix of "sad and glad borrowers" amongst those who took up fixed rates in 2008 and 2009.
Canstar Cannex finanial analyst Mitchell Watson said borrowers who locked in rates in 2008 found themselves fixing higher rates, but will now see a reduction in their repayments as their terms expire.
"Those people who thought they were doing the right thing and fixed their loans in 2008 will find their mortgage repayments ease by $100 a month as they come off their fixed rate," Watson said.
However, borrowers who chose a fixed rate facility in 2009 will now be subject to a more expensive interest rate environment, Watson commented.
"At the other end of the scale, borrowers who fixed in 2009 can look forward to paying $300 a month more due to the great variances in rate movements, and this is likely to cause a real headache," he said.
As lenders compete aggressively on price amid weakened credit demand, Watson said "the blow can be softened" for borrowers coming out of low fixed rate facilities.
"Fixed rates have dropped by 0.49% in the space of one month and we have also noted some package discounts increasing to 1.03% off the standard variable rate. Borrowers really are in the box seat for refinancing as well as new borrowing," he said.
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