Comparison site Mozo analysed 262 fixed rate loans in Australia and found that borrowers are being “stung by high revert rates”.
This typically occurs once the borrower’s contract ends with the lender.
Borrowers often assume the same conditions will roll over, but the analysis by Mozo noted examples of increases from 4.02 per cent per annum to 4.45 per cent per annum.
Those with a two-year fixed rate home loans pay on average 52 basis points higher in interest upon the end of their contract. This is a rise of an average rate of 3.93 per cent per annum to 4.45 per cent per annum.
For those with three-year fixed contracts, they experienced rises of 46 basis points, increasing from an average rate of 3.99 per cent per annum to 4.45 per cent per annum.
Mozo found that the biggest rate increases (more than 1.5 per cent per annum) were made by lenders such as Suncorp, Bank of Queensland, HSBC, RAMS, and Arab Bank Australia.
AMP, Well Home Loans, Kogan Money, SCU, and State Custodians decreased their rates after a five-year fixed term by up to 1.10 per cent per annum, though Mozo noted that their rates were “relatively high to begin with”.
Mortgage Choice’s latest national home loan approval data showed that demand for fixed rate home loans fell over the month of February, accounting for 22.8 per cent of loans, down from 23.8 per cent in January and below the six-month average of 23.4 per cent.
Of the 262 fixed rate loans that the comparison site analysed, 40 one-year fixed rate loans, 52 two-year fixed rate loans, and 40 three-year fixed rate loans reverted to a rate at least 1 percentage point higher than the rate borrowers were paying.
Adding 1 percentage point to the interest rate, from 4 per cent per annum to 5 per cent per annum, on a $400,000 mortgage over 30 years would add $247 to a monthly repayment.