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Honeymoon rates could bite recent first home buyers

25 November 2009 Reporter

First home buyers that chose low introductory rates will feel the pressure of rate rises, Loan Market Group’s chief operating officer Dean Rushton has claimed.

Mr Rushton said that many first home buyers were enticed to enter the market because of the increased government grant, with many choosing honeymoon rates that were as low as 4.5 per cent.

According to Mr Rushton, when borrowers’ honeymoon period ends their variable rates could jump by up to 1.5 per cent.

“In the same period the Reserve Bank may have increased rates by 1.0 per cent or more,” he said.

Mr Rushton said that Loan Market brokers only wrote a small percentage of introductory rate loans for first time buyers as often the basic and professional package discount loans offered better long term value.

“A lot of lenders use the honeymoon rates to attract business but borrowers need to… understand what the repayments look like after the honeymoon is over,” Mr Rushton said.

Honeymoon rates could bite recent first home buyers
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