Mortgage stress shifts with the end of fixed rates
Mortgage payments for many borrowers could rise sharply by the end of the year as their fixed rate mortgages come due.
Analysis by consumer advocacy group Finder found nearly $30 billion in fixed-rate mortgages will expire by the end of the year, with people’s repayments expected to rise by more than $600 a month.
The analysis found that this figure would grow to $158 billion in fixed rate mortgages by the end of 2023.
On average, repayments would increase to $10,872 per year.
The findings come after the Reserve Bank raised the official exchange rate by 50 basis points, to 2.35%, earlier this week.
This is the fifth month in a row that the central bank has raised interest rates.
While many subscribed to fixed interest rates when the official exchange rate hit a record low of 0.1%, the recent increases will drive up repayments once their terms expire.
Finder’s head of consumer research, Graham Cooke, said the end of low interest rate fixed rates could force many borrowers into mortgage stress.
“This is a very significant increase in reimbursements that many simply will not be able to afford,” he said.
“The ‘cliff’ of fixed interest rates is a very frightening prospect for many borrowers.”
RateCity research director Sally Tindall said mortgage holders could face a shock in the coming months.
“When they lower the rate, they could triple the rates they had when they were fixed and see their monthly repayments increase by hundreds of dollars,” she said.
“What they will find is a totally different mortgage market.”
The Reserve Bank is expected to raise interest rates further in the coming months in an effort to curb inflation.