What is a honeymoon rate and honeymoon period?

Honeymoon rates (also called introductory rates) offer a special low interest rate for a short, initial period of time before reverting to a standard rate for the remainder of the loan. 

This honeymoon period typically ranges between six months to several years, depending on the loan and the lender. The rate the loan is bumped up to when the honeymoon ends will either be fixed or variable, depending on the loan type you have.

Honeymoon rates are designed to temporarily alleviate the burden of a loan. 

They can be particularly appealing for first home buyers who need to invest in furniture and other costly expenses to get their home up and running, and want to ease into their mortgage repayments. They can also benefit buyers with stretched budgets looking for a short-term break from their usual repayments - keep in mind that if you have an existing loan, you’d more than likely have to refinance your mortgage to access a honeymoon rate.

Honeymoon rates can also be a good opportunity to pay off a large chunk of your loan while the interest is low, potentially helping you own your home sooner. Keep in mind though, the honeymoon period may be too short to make a substantial dent and the lender may limit the additional repayments you can make during the honeymoon stage.

Yes. While honeymoon rates can be blissful to begin with, there are potential risks you might come across if you decide to sign up for one.

The first is that the post-honeymoon rates may be a lot higher than you’d like. Lenders will often use reduced introductory rates to win you over and, while they can be enticing, these can sometimes be the most expensive options on the market. If they’re on the pricier side, you could actually end up paying more interest than you would on an average rate home loan.

Another risk of honeymoon rates is that there may be exceptions (such as missing a repayment) that cause you to revert before the honeymoon period is over - cutting your honeymoon short.

A final point is that honeymoon rates may come with less features, making it harder for you to make the most of your mortgage.

Ultimately this comes down to your personal and financial circumstances, and what you believe is best for you to manage your mortgage.

If you decide to get a honeymoon rate, make sure you understand the terms and conditions so you aren’t caught out by any surprises down the line.