Banks accused of conning borrowers
Borrowers are suffering after being put into fixed rate home loans as interest rates fall or their circumstances change.
Friday, November 5th 2004, 10:06PM
Resi Mortgage Corporation director Ros Kirkland said borrowers who followed the advice of the big four trading banks to fix their mortgage interest were now regretting their decision.
"With repayments for fixed rate mortgages falling in an interest rate war between the banks, borrowers who fixed their mortgages earlier are unable to take advantage of the current market trend.
Although rates have risen since the record lows of 15 months ago, they are now still only the same as in January this year.
Kirkland says fixed-rate borrowers are also disadvantaged in other ways.
“Borrowers are effectively signing a contract and should only do so when they are sure they are not going to sell the property during the contract period or will not have any major life-style changes,” she said.
“Where the property is sold, the contract still stands and the borrower is faced with paying penalty fees for breaking the contract."
Kirkland said she knew of one case where incorrect legal advice left a borrower facing penalty fess of $19,000 to break a fixed-rate mortgage contract in order to sell a property which had been purchased only a week earlier.
“Trading banks have been very effective in selling the idea of bringing certainty to your mortgage payments and playing on the fact that interest rates may increase further she said.
“However, very little has been said about the drawbacks or costs associated with fixing a mortgage.”
To compare home loan rates and see how they have changed go to http://www.goodreturns.co.nz/section/200.html
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