Fixed Rate Home Loan Cliff

What is the fixed-rate cliff? And how can refinancing your home loan help?

- You’ve probably heard that a staggering 800,000 fixed-rate home loans will revert to a standard variable rate by the end of this year - more than we've ever seen in history. As a result some borrowers will go from paying 1.9% interest to just under 6% in one jump.

This mortgage cliff will impact your budget. Here's how you can reduce the impact by refinancing your home loan:

Firstly, why does this fixed-rate cliff exist?

Simply put, before 2020, fixed-rate mortgages equaled around 20% of total Australian home loans. During the pandemic, the RBA dramatically slashed the cash rate to a record low of 0.10%, and many Aussies pounced on the opportunity to lock in a low interest rate for two to three years. This saw fixed-rate borrowing double to 40% of total Australian home loans.

Since May 2022, the RBA has hiked the official cash rate back up to 3.60%. The pain will really start to kick in around April this year. A mortgage holder who took out an average-sized loan of $538,936 with a fixed rate of 1.98% could see their repayments increase by over $1000 per month when rolling over to a standard variable rate.

So how should you refinance?

When a fixed-rate loan period ends, lenders usually roll into a standard variable rate with NO discounting attached. Usually people don't check with their broker and simply accept this new rate. However, as your broker I can scan my lender panel and find you a cheaper basic variable rate, and potentially get you a nice cash back offer too! So why wouldn't you do it? I can't think of a reason.

Are cash back offers FREE MONEY?

Absolutely not! While banks and digital lenders might try to tempt you with cashback offers for loan products, a holistic review of the rate, fees etc will determine whether that loan product is right for you. Many times there are better deals by simply forgoing the cash back and taking a cheaper rate with another lender.

But don't take my word for it, let me show you in black and white.

How to get started?

Simple give me a call. I'll guide your through what documents I'll need and make the process as easy as possible. Once I have your lender options handy, I'll touch base to present your options. Happy to work with you by phone or in person.

There are a few 'tricks" to lowering your monthly repayments:

1. We can lengthen your loan term up to 35 years to spread your mortgage over a longer period.

2. Debt consolidation of your credit cards and personal loans etc.

3. Do a small cash out to keep in your offset, so you won't fall prey to late fees etc.

Whatever your situation, the earlier we sit down and help you make a plan, the better I can help you manage the switch.

I'm offering a free home loan consultation to all Canterbury Bankstown residents including Revesby, Padstow, Panania, East Hills, Milperra, Campsie, Yagoona, Riverwood, Picnic Point, Lakemba, Kingsgrove, punchbowl and surrouns.

Matthew Stack- 0423 237 242