A broker has warned borrowers to be wary of chasing cheap fixed rates amid a wave of discounting that proliferate in the industry.
With fixed rate price cuts this week from lenders such as CBA, Westpac, St. George and ING Direct, Loan Market COO Dean Rushton has warned that borrowers could be enticed into fixing their home loans for the wrong reasons. Rushton pointed to discounts in fixed rates prior to the GFC, and said more than 100,000 borrowers found themselves locked into rates above 8% as the RBA began to make dramatic cuts.
There was much speculation about fixing rates at that time, and unfortunately many consumers had to sit on the sidelines and watch rates dramatically drop in the span of several months," Rushton remarked.
MPA Top 100 Broker Justin Doobov agreed, and indicated that a volatile interest rate market meant borrowers should avoid chasing discounts.
"Less than two weeks ago it was expected that the RBA would raise the cash rate, so if clients thought that rates were cheap a few weeks ago, then rates are now starting to look extremely cheap today," he told "Australian BrokerNews".
Rushton and Doobov agreed that certainty of repayment would benefit borrowers more than "a speculative play on where rates are going to move".