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Adjusting to Rates

Are you looking for guidance on what to do as you approach the fixed mortgage cliff? Well, you're in the right place. Keep reading and we will endeavour to help you through this process. If you have more questions about approaching the expiration of your fixed rate, come see our mortgage brokers here at The Newstead Group.



Why Were Fixed Loans So Popular During the Pandemic?

A fixed rate is an interest rate that remains at the same repayments for a specific period of time. But why were fixed loans so popular during the pandemic? At the beginning of the pandemic and in an attempt for the Reserve Bank of Australia to support the economy and mitigate the forecasts of a recession, Australia saw a significant decline in interest rates. The Reserve Bank of Australia provided banks with access to cheap fixed rates which banks then lent to borrowers. These low rate loans lead to a large increase in fixed rate borrowing and refinancing.


What Is the Fixed-Rate Mortgage Cliff?

In 2023 and 2024 these low fixed interest rates will expire for a large volume of households, and will switch to a much higher variable rate, a type of interest rate that fluctuates depending on the economy. This is commonly referred to as the mortgage cliff. In 2021 when the majority of fixed rates were locked in they were sitting the range of 2% to 3% and clients will now experience a 3% to 4% rise in their rates with current rates at their potential peak. The amount individuals and households repay will depend on their original fixed rate, and whether they continue onto a competitive variable rate. It is imperative individuals and households prepare for these changes in order mitigate the effects of this mortgage cliff and to continue to live comfortably.


How We Can Help You Prepare for These Changes

The RBA alongside our broking team predict there will be an increase in borrowers struggling to meet these higher repayments. Are you curious if you will be able to afford these repayments? Here at The Newstead Group we can help you prepare for these changes. Six months prior to the expiration date of your fixed rate loan, our brokers will check in on your fixed rate, and again two to three months prior. This will ensure you are well prepared for your rate and repayment changes. Here at The Newstead Group we understand what your repayment amount could change to, and we are here to help you prepare for change, setting up a strategy around saving money. In order to adjust this could even be as simple as starting to put away an extra $200 a week to see how well you will cope with changes.


Variable Or Fixed Rate

There is no right answer to having a fixed or a variable rate for your home loan, it is based around your individual unique circumstances. There are both positives and negatives to both options, so it is best to speak with a broker to see which is the best rate for you. Brokers also offer the option to split the rate, having half of your repayment on a fixed rate and half variable rate.


Wondering what our mortgage brokers can offer you? Get in touch with us here at The Newstead Group and we would be happy to answer any questions you may have.

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