Why is no one talking about Introductory Rate expiries?

What is an introductory (or honeymoon) rate?

An introductory, or honeymoon rate is a low interest rate offered to attract new customers. After some time, it increases to the lender's standard variable rate.

The End of the Honeymoon: Why Homeowners Need to Watch Their Mortgage Rates

When it comes to securing a mortgage, the lure of introductory or "honeymoon" rates can be hard to resist. These attractive offers, typically lasting 1-2 years, often promise significantly lower interest rates, making them an appealing choice for many homebuyers. However, what happens when the honeymoon is over? For approximately 670,000 mortgage holders across Australia, the end of these promotional periods in 2024 will bring a rude awakening as they face a sharp increase in their interest rates.

The Financial Impact of Expiring Introductory Rates

As these special rates revert to higher standard variable rates, the collective financial pressure on Australian households will be substantial. It's estimated that these homeowners will end up paying around $2.41 billion more annually in interest payments. This significant jump not only strains personal finances but also impacts the overall economic stability of countless families.

The Path of Least Resistance is Costly

Refinancing a home loan, though a viable solution to this impending rate hike, is often viewed as a daunting task. Many borrowers find themselves opting for the "path of least resistance" — doing nothing. This inertia is costly. Research indicates that 32% of mortgage holders, approximately 214,400 individuals, will choose inaction, collectively paying over $14.4 billion in excess interest payments for the duration of their loans.

Simplifying the Refinance Process

Despite the common perception, refinancing can be less complicated than securing the initial loan. With many banks now adopting a reduced 1% serviceability buffer (down from 3%), the process has become more accessible for homeowners looking to shift their loans to new providers. This change is designed to alleviate some of the hurdles associated with refinancing, encouraging more homeowners to take action.

Craggle: Your Partner in Refinancing

At Craggle, we understand the stress and strain of managing home loan costs. That’s why we offer the Fairness Check — an impartial assessment designed to help homeowners compare their current home loans against others in the market. If you find yourself paying more than necessary, possibly falling into the trap of the "loyalty tax," it’s time to consider your options.

Don’t settle for costly inaction. Let us help simplify the refinance process for you. By providing us with a little information about your situation, we can deliver tailored mortgage options that balance serviceability with cost, ensuring you're not caught off-guard by rate increases. Escape the financial squeeze of expired honeymoon rates and secure a loan that fits your needs and budget.

Take Action Today

If your bank has sent, or is soon to send, a rate increase letter, remember that the path to a fairer home loan might be simpler than you think. Avoid being part of the 32% who do nothing. Contact Craggle today, and let us guide you through the refinancing process, helping you save money and reduce stress. Your financial well-being is too important to leave to chance.

Disclaimer: The opinions expressed in this article are strictly for general informational purposes only and should not be taken as financial advice or recommendations.