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Beware the loan with low rate honeymoon

17/10/2011

Introductory rate home loans with attractive honeymoon periods may look tempting to new borrowers but can cost more.

The current average advertised rate for introductory rate loans with a 12-month discount period is 6.75 per cent, with an average revert rate after that first year of 7.51 per cent. The average interest rate for all standard variable rate home loans is 7.22 per cent.

Resi Mortgage Corporation chief executive Lisa Montgomery says anyone considering an introductory rate home loan should ask the lender what the revert rate is and compare it with others in the marketplace.

She says before taking out this type of loan, borrowers should also check key features such as fees, comparison rates and the level of customer support the financial institution can provide.

Source: The Daily Telegraph



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