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One lender has hit out at “tricky marketing” by rivals that could potentially lead to borrowers paying more than $100,000 in extra interest.
Online lender loans.com.au, which is owned by Firstmac, warned that borrowers could suffer if they made decisions based on teaser rates rather than comparison rates.
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Firstmac managing director Kim Cannon said the “mounting hysteria about interest rates with a three in front” was obscuring the importance of comparison rates.
“One credit union is offering a fixed interest rate of 3.95 per cent per annum, which sounds too good to be true – and it is. The comparison rate is 5.05 per cent,” he said.
According to loans.com.au, every additional 0.25 per cent in interest is worth about $73 a month in higher repayments for a $350,000 home loan with a 30-year term.
“So if the difference in the interest rate is more like 1.1 percent, that is about $114,400 in extra interest over the life of the loan,” Mr Cannon said.
“The message is simple: ignore the teaser rate because that’s not what you will pay,” he said.
“The true cost of the loan is what the comparison rate will tell you. Over the life of your loan this is likely to add up to many thousands of dollars.”
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