Mortgage interest fixed-rate borrowers face hefty fees if they want to switch to a standard variable loan right now. The horse has bolted and the banks have to set their rate and costing long term to fix a rate. (
A further massive mortgage interest rate cut this week has made more than 43,000 home borrowers who chose to fix their rate, Australia's biggest mortgage losers.
The costs of exiting an average fixed-rate mortgage jumped to $18,000 because break fees for the loan rise as interest rates fall.
Banks charge break fees to exit fixed-rate home loans so they can meet interest payment obligations to term deposit customers.
The Reserve Bank of Australia (RBA) on Tuesday announced it would slash official interest rates by 100 basis points point to a six-and-a-half year low of 4.25 per cent.
The 43,632 borrowers who opted for fixed-rate mortgages between March and August this year, when interest rates were at a decade-high peak, face hefty fees if they want to switch to a standard variable loan.
Official interest rates would have to fall to the lowest levels since February 1965 for these borrowers to recoup the cost of switching out of a fixed loan through cheaper mortgage repayments. [This is on teh cards according to Mr Mortgage]
A further home loan rate cut of .5% is expected in February, and there could be more to come to assist home sales and home owners to weather the storm and have money to spend to get the economy from sliding into recession.
We are in for some interesting mortage times ahead!
