Homeowners Near Mortgage Cliff as Fixed Rates End

With interest rates continuing to rise, many homeowners are rolling off their fixed-rate mortgages, which is leading us to a so-called mortgage cliff. Homeowners with fixed-rate loans are expected to revert to sharply higher variable rates. These changes are going to have a significant impact on households in Australia, with rates of 2% jumping up to 5%, a big jump, and their expenditure is going to be heavily squeezed.

According to recent estimates, a large proportion of borrowers have not yet felt the sting of rate rises, but approximately 46% of all fixed-rate loans are expected to expire in 2023. This means over 800,000 borrowers could face repayment increases of up to $61 per month. This is a considerable increase in expenses that many households may not be able to afford.

The best advice for homeowners who are worried or concerned about their mortgage repayments increasing is to contact their broker and their bank to try and get that variable rate or the new fixed rate as low as possible. Just talking to someone who’s an expert can soften the anguish and emotion involved in this huge change in their lives.

The Reserve Bank is likely to continue lifting rates this year, and with uncertain times on the horizon for many households, having a financial plan in place is key. One of the most important pieces of advice Australia can take is to make sure they know when their fixed rate is coming to an end. This way, they can prepare about a month earlier to either refinance their home loan or get onto the best possible variable rate.

Experts suggest that borrowers who are approaching the end of their fixed-rate loans should start thinking about their options early, as this gives them enough time to compare rates and find the best option for their financial situation. It’s crucial for homeowners to be aware of their options to avoid being caught off guard by the mortgage cliff.

Furthermore, the rising rates could have a ripple effect on the broader economy, causing businesses to reduce their investments and potentially leading to a decline in the housing market. This situation could cause a domino effect on the economy, impacting various industries and potentially leading to a recession.

While the current situation may seem overwhelming for many homeowners, it’s essential to remain calm and proactive. Talking to experts and staying informed about the latest developments can help individuals prepare for the changes ahead. It’s vital to remember that there are options available, and taking the time to explore these options can help households make informed decisions about their finances.

In conclusion, the end of fixed rates is a reality that many homeowners will have to face in the coming months. The key to managing this situation is to stay informed, be proactive, and explore all available options. By doing so, households can navigate this difficult time and make the best decisions for their financial future.