It has been very well reported that many
mortgage holders will soon be paying much higher interest rates when their
fixed rate terms expire.
It is estimated that $478 billion worth
of fixed-rate mortgages is due to expire in 2023.
In addition, borrowers may also have to
navigate the end of an interest-only term, which typically applies to
investment loans.
This blog sets out our advice on how to
navigate these changes.
What are your options?
FIXED-RATE EXPIRY
If your fixed rate is
maturing, you have two options.
You can re-fix your
interest rate for another term or allow the interest rate to roll over onto a
variable rate.
Current fixed rates range
between 5.39% and 6.10% p.a. for owner-occupiers and 5.69% to 6.70% p.a. for
investors (terms between 2 and 5 years).
Variable interest rates
range between 4.75% to 4.90% p.a. for owner-occupiers and 5.30% to 5.50% p.a.
for investors on interest-only repayments.
As such, fixed rates don’t
look attractive for a couple of reasons.
Firstly, it is very likely
that we are at or close to the top of the interest rate cycle.
So, there’s limited value
in paying a premium (i.e., a higher interest rate) to protect yourself against
potentially higher interest rates in the future.
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Jason Gwerder
Tuesday, 28 March 2023
