We get how difficult it could be right now if you’re playing the waiting game and wondering what will happen after your fixed rate period expires.
The Reserve Bank’s cash rate increases have been temporarily insulated from fixed rate borrowers, but for how long?
Nearly 40% of Australians with low fixed-rate loans are predicted to default on them the following year. For households already under financial strain due to rising cost of living pressures, this could result in a significant rise in mortgage repayments.
Review your mortgage and develop a strategy if your fixed rate is about to expire.
Questions to ask when reviewing your home loan
Consider your present debt, your situation personally, and your aspirations as a first step.
• Does your loan serve your needs?
• Are you efficiently utilising any features, such as offset accounts or redraw facilities?
• Has your family or financial situation changed, and might this have an impact on the best loan type for you?
• What are your plans for the property—to keep it, sell it, use the equity to make improvements or purchase a rental property?
What you decide to do when your fixed rate expires could ultimately depend on the answers to these kinds of questions.
What happens when my fixed rate ends?
Closer to the time the loan term expires, your lender will probably contact you with a fresh offer to restructure your loan. If you don’t take action, your mortgage will often switch to the variable rate set by your lender.
What are my options?
You can continue working with your existing lender when your fixed term expires or refinance to a different one. You might:
- Re-fix your home loan. You can plan your budget accordingly if you choose this option because you will know exactly what your repayments will be during the fixed term. However, if you finish your set term early, you can be responsible for break expenses.
- Change to a variable. There may be benefits like loan features and limitless repayment possibilities with variable rates that can help you advance financially. Variable rates could be lower than the proposed new fixed rates. However, your interest rate can climb if the cash rate does.
- Split your loan. When your loan has a fixed portion and a variable portion, you may be able to benefit from both loan types.
Can I extend my current fixed rate mortgage?
Regrettably, no. You can, however, fix your mortgage rate at a new level. Most lenders provide 1 to 5 year fixed terms.
What if I re-fix then need to sell or refinance?
You might have to pay break fees to the lender if you fix your interest rate but then need to sell or refinance.
Break fees might be high. The amount you’ll be up for varies depending on the lender, loan size, and length of fixed term, among other things.
The majority of the time, there are no penalties for refinancing from a variable rate.
What can I do if interest rates have gone up when my fixed rate ends?
The most crucial step is to search around to obtain a competitive loan that matches your financial situation and objectives.
Don’t just focus on the interest rate when evaluating a loan deal. What features can save you interest? What are the costs charged by various lenders?
Keep in mind that you might be able to locate a better deal with a different lender.
We’re here to help
You have every right to be anxious given the significant degree of uncertainty about how much higher interest rates could rise. Be assured that we are here to support you at this trying time.
In order to determine whether your mortgage still matches your needs, we can review it. Contact us right away.