Weekly finance update - Fixed rate loan expiry - Mortgage Domayne

Weekly finance update – Fixed rate loan expiry

April 15, 2023

Welcome to the finance update for the week ending 15 April, 2023.

Interesting to see a few smaller lenders are starting to reduce their fixed rate home loans during the past week which suggests that they are anticipating some easing of rates by the RBA in the near future. The bigger lenders however have left their’s unchanged (see the tables below), and a few have even nudged their variable rates up ever so slightly upwards in the past week. So some mixed messages coming out of lender land at the moment.

In this week’s newsletter, we take a closer look at data that has been revealed about the looming reality for many borrowers coming off low fixed rate loans. It makes for sobering reading for those in this predicament, but we can help limit the impact, so if any of your clients are facing into this reality, put them in touch with us and we can discuss their options.

When will fixed rates expire?

This of course depends on when the loans were taken out, however the bulk of those who fixed to take advantage of low rates several years ago, will expire in the coming six months – approximately 880,000 fixed loans are set to revert to variable in that period as evidenced by the table below.

How much more will borrowers need to pay?

The answer depends on what the fixed rate was, how much the loan was for, and what variable rate the borrower will land on.

Regardless of the scenario, the change in rate will generally equate to somewhere between 3% – 4%. A loan balance of $500,000 will see an increase of circa $800 a month, a loan of $600,000 can expect an increase in monthly repayments of more than $1,000, whilst those with a fixed mortgage of more than $750,000 can expect monthly increases of over $1,200 per month.

What are the consequences?

This is the great unknown and we can’t answer that for you. What we can say is that we have been in regular contact with out fixed rate clients advising them of what they can expect in terms of repayments changes so they can be prepared. Our hope is that other mortgage brokers have been doing the same with their clients.

Any changes in interest rates from last week are highlighted in orange.

Note – Increases announced by lenders as a result of RBA decisions normally take 1-2 weeks to come into affect.

Standard Variable

The rates below are based on a $500,000 loan, with the borrower making principle and interest payments with a loan term of 30 years. The rates quoted may vary depending on the borrowers LVR.

1 Year Fixed

The rates below are based on a $500,000 loan, with the borrower making principle and interest payments with a loan term of 30 years. The rates quoted may vary depending on the borrowers LVR. At the end of the three year fixed period, the borrowers interest rate will revert to a standard variable rate for the life of the loan.