Mother of three Kimberley Starr is one of at least 880,000 Australians who is set to have their fixed-rate mortgage expire this year, meaning repayments will soon explode by another $1000-dollars in this current cost-of-living crisis.
Aussies on the Brink of Mortgage Cliff as Fixed Rates Set to Expire
In a blow to thousands of Australian homeowners, an estimated 880,000 fixed-rate mortgages are set to expire this year, leading to a potential surge in repayments amidst a prevailing cost-of-living crisis.
These fixed-rate mortgages, which offered borrowers a shield against fluctuating interest rates, will soon revert to standard variable rates. The shift implies that homeowners could see their mortgage repayments rise by approximately $1,000, putting additional pressure on household budgets already strained by the rising cost of living.
The situation, often referred to as the ‘mortgage cliff,’ is likely to affect families across Australia, from first-time buyers who capitalized on low-interest rates to long-term homeowners. Kimberley Starr, a mother of three, is one such Aussie bracing for the impact. “The expiration of our fixed-rate term couldn’t have come at a worse time,” she said.
This looming financial crisis has been exacerbated by the Reserve Bank of Australia’s (RBA) repeated hikes in interest rates. According to data from the RBA, another 40% of fixed-rate loans outstanding in early 2022 will expire by the end of 2023, and a further 20% by the end of 2024 (RBA).
The issue doesn’t stop there. Along with the 880,000 expiring fixed loans in 2023, there are a further 450,000 due to expire in 2024 and beyond (The Guardian).
The situation highlights the need for homeowners to be proactive in managing their finances. Financial experts recommend borrowers to start planning ahead and to consider refinancing options if their fixed-rate term is nearing its end.
The ‘mortgage cliff‘ serves as a stark reminder of the volatility of financial markets and the need for effective policy measures to safeguard individuals from unforeseen economic shocks. As the clock ticks towards the expiration of these fixed-rate terms, the focus now shifts to how the government, financial institutions, and borrowers will navigate this impending challenge.
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