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Mortgage cliff countdown: 27% of borrowers due to come off a fixed rate

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There's more mortgage hardship on the horizon with the last of the fixed rate mortgage customers reaching the end of their terms, according to new research by Finder.

A Finder survey of 1,012 respondents – 292 of whom have a mortgage – revealed 27% are due to come off a fixed rate in the next 12 months.

That's roughly 891,000 mortgage holders who took out a low fixed-rate loan during the pandemic and are yet to roll onto variable rates that are in most cases almost three times higher.

A further 21% – 693,000 households – say they have already rolled off cheap fixed rates in the past five years, with many struggling with sky high repayments.

Sarah Megginson, personal finance expert at Finder, said thousands of Aussies still hadn't experienced the pain of the fastest and largest rate hiking cycle on record.

"A massive change is coming for those borrowers who were very fortunate to put their rate on ice when they did.

"Rates have been rising persistently over the past two years and are 4.25% higher than they were – but this group has been insulated from the sting, as they locked in their loan just before rates started to climb."

The RBA's next interest rate decision is just a few days away (18 June 2024).

After 13 interest rate rises since April 2022, the average homeowner is paying almost $1,400 more in monthly repayments.

Megginson said experts are divided on whether the rate increasing cycle is over, though inflation is trending down, and the forecast is that the RBA cash rate will trend down with them.

"We expect that many mortgage holders will be unable to meet their monthly obligations if rates do increase, as it would be a huge financial shock."

Megginson urged Aussies in mortgage stress to discuss hardship arrangements with their lender.

"There's options available to struggling customers such as interest only loans and mortgage holidays until they can sort out their serviceability.

"For those overcommitted, there's also the option to rent out a spare room or downsize if they're not coping."

Are you paying a fixed interest rate on your mortgage which is expiring in the next 12 months?
Yes, part/all of my mortgage is on a fixed rate and I am coming off it in the next 12 months27%
No, I have paid a fixed rate in the last 5 years but it has already expired21%
No, I have not paid a fixed rate in the last 5 years52%
Source: Finder survey of 292 mortgage holders, May 2024

Methodology

  • Finder's Consumer Sentiment Tracker is a monthly recurring nationally representative survey of more than 60,000 respondents.
  • Figures in this release are based on 1,012 respondents from May 2024, 292 of whom have a mortgage.
  • The Consumer Sentiment Tracker is owned by Finder and operated by Qualtrics, an SAP company.
  • The survey has been running monthly since May 2019.

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