{"id":5209,"date":"2023-02-16T09:36:41","date_gmt":"2023-02-15T23:36:41","guid":{"rendered":"https:\/\/financialplus.com.au\/?p=5209"},"modified":"2023-02-16T09:36:41","modified_gmt":"2023-02-15T23:36:41","slug":"how-to-prepare-for-a-fixed-rate-mortgage-cliff","status":"publish","type":"post","link":"https:\/\/financialplus.com.au\/how-to-prepare-for-a-fixed-rate-mortgage-cliff\/","title":{"rendered":"How to prepare for a fixed-rate mortgage cliff"},"content":{"rendered":"
Like many Australians, you may have taken advantage of the interest rate good times by locking in a cracking rate.<\/p>\n But as they say, all good things must come to an end.<\/p>\n Indeed, the Reserve Bank of Australia (RBA) has estimated that\u00a0800,000 fixed-rate loans will end this year<\/a>.<\/p>\n If that includes your loan, below are some tips to help you navigate the transition to higher repayments smoothly.<\/p>\n Variable interest rates have been rising in recent months. And you can expect your mortgage repayments to follow suit once your fixed-rate loan contract ends.<\/p>\n Do you know how much extra you may have to pay each month? And where will you find the extra cash?<\/p>\n Giving your budget a tidy-up now may put you in a better position to decide what loan product will suit you going forward to help you meet your repayments.<\/p>\n Consider cutting back on non-essentials (streaming services, takeaway coffees, alcohol, restaurants) and look for cheaper offers on your big-ticket bills like insurance and utilities.<\/p>\n Doing so now can also help you save up a buffer that\u2019ll ease your transition to future higher loan repayments.<\/p>\n One of the worst things you can do when rolling off a fixed-rate loan is to simply accept the variable rate your lender automatically provides.<\/p>\n Lenders are more likely to offer attractive rates to new customers, not their existing ones. It\u2019s often referred to as the \u201cloyalty tax\u201d.<\/p>\n Before your fixed-rate contract ends, we can talk to your lender and let them know you\u2019re exploring your options.<\/p>\n In order to keep you on board they may very well make an offer you find acceptable.<\/p>\n Continued rate rises are expected in 2023 and, depending on your situation, you may wish to refix your loan.<\/p>\n You could also consider a split loan \u2013 where part of your loan has a variable rate, and the other part is fixed.<\/p>\n That said, not all lenders allow you to refix all or part of your loan.<\/p>\n If you want a fixed or split loan and your current lender won\u2019t provide it, then you may want to explore your options elsewhere by refinancing.<\/p>\n This brings us to our next point.<\/p>\n If your existing lender doesn\u2019t come up with the goods then refinancing is an option.<\/p>\n Refinancing may get you access to rates and features that banks use to woo new customers. And it can potentially save you thousands.<\/p>\n According to 2022\u00a0PEXA data<\/a>, refinancers saved on average $1,524 per year. The\u00a0ACCC reported in 2020<\/a>\u00a0that mortgagors with 3 to 5-year-old loans paid an average 58 basis points more in interest than new lenders.<\/p>\nDo you have a fixed-rate mortgage contract that\u2019s coming to an end soon? It can be a stressful time, particularly with rate rise news dominating the headlines. So today we\u2019ve got some tips for a smooth transition.<\/strong><\/p>\n
Crunch the numbers<\/h3>\n
Negotiate your rate<\/h3>\n
Do you want to refix?<\/h3>\n
Time to refinance?<\/h3>\n