A Fixed Rate Mortgage Bomb Will Detonate

Thousands of fixed rate mortgage borrowers are facing an interest rate ‘cliff’ and could be plunged into a mortgage crisis by the end of the year.

According to Finder, $29.8 billion in fixed rate mortgages are due to expire by the end of 2022.

This amounts to $158 billion by the end of 2023.

This could increase repayments by up to $10,872 per year, on average.

Head of consumer research at Finder, Graham Cooke said the “cliff” of fixed interest rates is a scary prospect for many borrowers.

“Hundreds of thousands of Aussies will be hit hard, and many of them will face mortgage stress if they are not sufficiently prepared,” Mr Cooke said.

“This is a very significant increase in reimbursements that many simply will not be able to afford.”

An estimated $29.8 billion in fixed-rate mortgages will expire by the end of 2022, which will mean an additional $641 in monthly repayments for Australian homeowners by Christmas.

Fixed rate mortgages peaked at 46% of all new home loans in July and August 2021.

However, these low fixed rates are expected to turn into floating interest rates above 5% over the next 12 months.

With an average loan size of $509,422, Australians could expect a $906 increase in their monthly repayments on the average homeowner’s mortgage by the end of 2023.

Mr Cooke said borrowers should look to put additional funds into their mortgages for the rest of 2022, to build a reserve for any higher repayments to come.

“Very few Australians have the emergency funds they need to handle a monthly increase in this proportion – and the rate increases may not be over yet,” he said.

Finder’s Consumer Sentiment Tracker shows that 25% of borrowers are already struggling to repay their home loan each month.

Mr Cooke said mortgage holders who are worried about a large increase in their repayments should contact their lender and make arrangements.

“Failing to make a plan with their lender could have serious consequences,” he said.

“There’s still time to jump online and get a better deal.”

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