What you should know about the “fixed-rate cliff”
30/6/2023
Australia’s mortgage market is experiencing a significant shift, with many homeowners coming off two-year and three-year fixed-rate loans onto much higher variable rates over the next 12 months.
Starting during the 2020 pandemic, there was a boom in fixed-rate borrowing, as lenders slashed their fixed rates to record-low levels and many borrowers took advantage. At the peak, almost 40% of outstanding home loans in early 2022 were fixed, which was “roughly twice their usual share from prior to 2020,” according to a research paper published by the Reserve Bank of Australia (RBA).
As of March 2023, about 25% of fixed-rate loans outstanding in early 2022 had expired. By the end of 2023, another 40% will expire, and another 20% by the end of 2024. This is what the media has been referring to as the “fixed-rate cliff”.
Here are three tips if you’re about to revert from a fixed to a variable loan:
