22 November, 2001
MEDIA RELEASE
More To 4.95% Rates Than Meets The Eye
People need to consider the hidden fees and costs attached to the attractive offers from lenders of 4.95% pa on six
month rates warns Paul Bravo, Head of Home Loans for Sovereign Limited, New Zealand’s largest non-bank home loan lender.
“People attracted to the current special deals, need to consider the long term effect. For example, the cost of refixing
their home loan in six months time, and the likelihood of having to pay a higher interest rate then.
“Our experience has shown that less than 2% of our customers choose the six month term. Locking into a rate for six
months is not going to protect them from increasing rates through a complete interest rate cycle. Our research has
determined that borrowers want the certainty that a fixed rate provides for longer than six months,” he said.
Mr Bravo says Sovereign believes that a medium to long-term outlook would actually give better returns, even though the
short-term rates may seem appealing.
“These six month rates often contain fine print of establishment fees, or application fees which make them prohibitive
for borrowers over such a short period of time.
“When you dig deeper you find out that these loans usually have a non-negotiable fee of around $500, and if you want to
take out another fixed rate at the end of the fixed term you could also get charged a redocumentation fee of as much as
$300. For most people this more than offsets any savings made from the lower interest rate. People need to consider the
complete cost of the home loan, not just the interest rate.”
“Our research and experience supports Sovereign’s philosophy, that is we always deliver our customers a flexible home
loan product that has no-ongoing fees with consistently competitive and transparent interest rates. With the abundance
of ‘deals’ out there at the moment, we’re cautioning people to watch out for short-term pitfalls with long-term
ramifications,” he said.
Ends
Released on behalf of Sovereign by Network Communications (ph: 09- 379 3154).
For further information, please contact: Paul Bravo, Head of Home Loans,
Ph: (09) 487 9884.
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