A major mortgage company has warned home loan borrowers about ‘phantom rates’, questioning the sustainability of super-low interest rate offers from lenders in current market conditions.
Managing director at 1300HomeLoan, John Kolenda, told Australian Broker that lenders have been trying to attract consumers with aggressively priced mortgage products which aren’t actually true.
“Some lenders are aggressively pricing products to lure customers and boost their market share and then when they are signed up they increase their mortgage rates independently of any interest rate decisions by the Reserve Bank of Australia,” he said.
“Home loan customers have every right to be angry about these discounted phantom rates that prove to be nothing more than an illusion.”
Mr Kolenda said lenders were blaming increased lending costs and regulatory body crackdowns for the increases in their rates.
“We also had the out of cycle raises on home loan rates in response to rising funding costs and the additional costs coming in for the additional compliance and regulatory increase on reserves that the banks will have to have in place by end of June this year,” he told Australian Broker.
“But the bank wholesale funding costs did not rise enough to warrant the types of rate increases they imposed.”
“I think there was an element of a profit grab done under the umbrella of higher regulatory and funding costs at the time when those decisions were made.”