If you're one of the 450,000 households coming off their fixed rate mortgage in 2024 and beyond, here's how you can prepare.
Yesterday, the Reserve Bank of Australia woke up and chose to rock our reasonably stable boat..
Michele Bullock and her gang increased the cash rate by 0.25% for the first time in four months.
That means the cash rate has jumped from 4.10% to 4.35%
And with almost 1.3 million households coming to the ‘expiry’ of their 2 or 3 year fixed rate mortgage, that’s going to be a whole lot more than just a 0.25% jump.
So if you’re getting close to the end of your fixed-rate mortgage here’s how you can prepare for the challenge.
Number one: Set a game plan…early.
Look at your budget as it sits now and work out what your repayments will look like once your fixed term ends. It’s likely that this will seriously affect your budget.
For example, if you held a 30 year mortgage of $590,000, that had a fixed rate for 3 years, you’d be paying $1413 per month more today than you were two years ago.
You can use the MoneySmart repayment calculator to work out your current loan repayments vs future repayments.
You might need to make some changes to your budget to accommodate the higher repayments, and it’s helpful to be prepared.
Number two: Start paying off extra now if you can
If you’ve still got a few more months before your fixed-rate mortgage expires, you should try and start making increased repayments now.
This will soften the blow when you’re hit with the variable rate.
Number three: Shop around till you drop.
Often the interest rate you’ll be reverted to once your fixed rate expires is higher than other deals on the market - loyalty tax baby.
Try to negotiate a better deal with your lender. Their goal is to keep you as a customer. Tell them that you’ll look to leave if they can’t offer you a better deal.
If you’re not having a lot of luck with your current lender, you can look to refinance with a new lender.
The Flux Home Loan Wizard will help you see if there are better deals in the market
Number four: Don’t leave the talk till too late.
If you’re in a position where you’re struggling to keep up with your repayments, contact your lender. Don’t wait till you’re way too stressed.
Contact the financial hardship team if you anticipate mortgage stress.
They can help you out with things like creating a payment plan, or transferring you to an interest-only loan.
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