If you’re coming to the end of a fixed rate home loan, it’s critical to speak to my team today!
You may have come across the term ‘mortgage cliff’ in the media lately. It refers to the vast number of Australians who are facing the prospect of moving from a super-low fixed rate to a considerably higher variable rate.
Your loan rate could more than double
By way of background, many home owners took the opportunity (quite sensibly) to lock into super low fixed rate during the worst of the COVID pandemic.
We saw record numbers of borrowers use this strategy, and at one stage, 45% of new home loans involved a fixed rate – often paying an average rate of just 2.2%[1].
For many of these borrowers, crunch time is fast approaching. Their fixed rate term is coming to an end, and in the meantime, home loan rates have skyrocketed.
It’s estimated that two in five of these fixed rate borrowers could see their home loan commitments jump 40%[2]. That can be a tough call at a time when living costs are also rising rapidly.
You don’t have to pay 7%
Without the support of an experienced broker such as AAP Finance Brokers, homeowners leaving a fixed rate can be seriously overcharged.
We recently met with a client who came off a fixed rate, and was transferred to the lender’s standard variable rate – a whopping 7.14%. That’s an exceptionally high rate to pay in today’s competitive mortgage market.
Fortunately, the home owner involved wasn’t prepared to just wear the higher rate, and sought our help to secure a more competitively priced loan, which we did, and saved the client over $9,000 in annual interest cost savings. But it begs the question, how many other people are being unnecessarily squeezed by a ridiculously over-the-top rate?
[1] https://www.mpamag.com/au/news/general/sydney-melbourne-to-feel-most-pain-from-mortgage-cliff/432850
[2] https://www.mpamag.com/au/news/general/sydney-melbourne-to-feel-most-pain-from-mortgage-cliff/432850
Three reasons to consider refinancing
If you’re nearing the end of a fixed rate it is important to contact my office as a matter of urgency.
Right now, three things are happening in the home loan market that could help you minimise the impact of moving off a very low fixed rate:
- New borrowers continue to pay the lowest rates
In a bid to attract new business, many lenders are offering a much lower rate to new customers, while established borrowers pay a far higher rate. This isn’t just unfair, it also provides a clear financial incentive to consider moving to a new loan or lender when your fixed term expires.
- Not all lenders have been passing on the full value of the latest Reserve Bank rate hikes
The latest banking round-up report from Mozo[1] shows some lenders have not only absorbed part of the latest round of rate rises, they have even reversed part of their earlier rate hikes. This highlights the value of shopping around to get the best deal – something that is part of my home loan service, which comes at no cost to you.
- You could score a cash incentive to move
Special offers, including cashback payments to refinancers, have become more common over the last year[2]. These sweeteners can all make it more attractive to refinance to a new loan.
[1] https://cdn.mozo.com.au/roundup/mozo-banking-roundup-202301-jgan78w.pdf
[2] https://cdn.mozo.com.au/roundup/mozo-banking-roundup-202301-jgan78w.pdf
The time to act is now!
If your fixed rate loan is heading towards the end of its term, it is essential to call me today. The sooner you act, the sooner we can get the ball rolling to explain your options and help you develop a strategy to minimise the moving to a higher rate.
Yes, the days of ultra-low rates are behind us. But you don’t have to wear an unnecessarily high interest rate. Remember, our home loan service comes at no cost to you, so you have nothing to lose – and everything to gain by making an appointment today.
