Why Are There Always Two Advertised Interest Rates on a Home Loan?

When it comes to Home or Investment Loans it’s like comparing apples to oranges to pears to, well, sometimes, lemons.

To help customers recognise the value in a Home Loan product, the regulatory body sets guidelines for how the banks can advertise their products. When advertising an interest rate figure this involves the mandatory use of ‘Comparison Rates’, which are designed to highlight to the consumer hidden costs and more importantly, how the advertised loan compares to other loans.

However, the generic Comparison Rate doesn’t always reveal the most suitable loan. It is worth seeking professional advice when comparing the true value in a loan. Here’s why;

The Comparison Rate is a set standard for comparing loans. This standard includes;

- Loan amount $150,000

- 25 year term

- Some 'one-off' fees and Ongoing/recurring fees

Unless your personal circumstances match these specific criteria, the Comparison Rate will not accurately distinguish which loan will save you the most money. New property purchases and subsequent new loans are generally set at a 30 year term and most commonly larger than $150,000. As a general rule, to save more money on a loan with a higher loan amount the interest rates become more relevant, rather than ongoing fees.

To accurately compare loan products you should engage the services of a qualified professional. These services are FREE OF CHARGE and ensure you find yourself in the best possible position for your own unique circumstances.

To help navigate the available options and for more information please contact a Prefix Finance Mortgage Consultant.

August 2016