The head of a major mortgage broking franchise has warned borrowers to be on the lookout for home loan deals that seem too good to be true.
John Kolenda, managing director of 1300HomeLoan, believes a number of lenders are currently offering “phantom rates,” which are only designed to bring people through the door.
“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 (RBA),” Kolenda said.
“Home loan customers have every right to be angry about these discounted phantom rates that prove to be nothing more than an illusion,” he said.
Out of cycle rate increases have become increasingly prevalent in recent months; however Kolenda believes lenders are taking liberties with recent increases.
Kolenda accused some lenders of a cash grab after the increases they announced following changes in regulatory measures requiring them to hold more capital against their mortgage books.
“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,” Kolenda said.
“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.”
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