LENDERS are kicking cash-strapped mortgage holders while they are down by jacking up interest rates for customers when they fail to meet repayments.
News Corp Australia can reveal some of the nation’s largest lenders, including the Commonwealth Bank and Westpac, bump up rates by two per cent for customers who fall into arrears.
The penalty rate for non-bank lenders can be even higher.
On a standard $300,000 30-year loan with an interest rate of four per cent, a two-per cent jump would take the rate to six per cent and cost borrowers an additional $15 in monthly interest charges.
On top of the rate rise, CBA customers who fall behind are slapped with a late fee of $20.
CBA penalises customers if they fall behind in their mortgage repayments.
Debt collection agency Prushka’s founder Roger Mendelson said hiking interest rates on struggling customers was not a good solution.
“Penalty rates are a fact of life and consumers should be aware of them and ensure that payments are paid on time,’’ he said.
“The problem is that is exacerbates the loss a borrower faces if they get into serious default.
“If the loan is from a non-bank lender the penalty rate can be higher than two per cent so it is worth checking.”
Debt collection agency Prushka’s founder Roger Mendelson said home loan customers should be aware they will get stung with a higher interest rate if they are late on repayments.
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Despite interest rates remaining at record-low levels latest figures show mortgage delinquencies are on the rise — ratings agency Standard & Poor’s figures revealed mortgage arrears on residential properties increased from 1.14 per cent in September to 1.15 per cent in December.
CBA’s executive general manager of home buying Dan Huggins said there are options available for customers who fall into arrears.
CBA’s executive general manager of home buying Dan Huggins said customers who cannot meet mortgage repayments should contact their lender.
“Unfortunately sometimes our customers fall behind on their mortgage repayments,’’ he said.
“In the event customers are experiencing difficulties, we encourage them to call us as soon as they can.”
Like CBA, Westpac confirmed borrowers who fall into arrears are slugged an extra two per cent on their outstanding mortgage repayments.
ANZ and NAB do not impose such a rate rise.
Borrowers should also be mindful banks will monitor their repayment history closely and if they miss repayments they will get a black mark against their name, Home Loans Experts' managing director Otto Dargan said.
“Borrowers should be extra careful to make all their repayments on time these days as banks use your past repayment history in their scoring,’’ he said.
“If you’re just a few days late then they’re far less likely to approve loans for you in the future.’’
This article was first published by http://www.adelaidenow.com.au
Author: Sophie Elsworth, Personal finance writer, News Corp Australia Network