Mar 13, 2023 1:56:46 PM

5 Things to do Before Your Fixed Interest Rate Rolls Over

Topics: Interest Rates, Financial Health, Budgeting 0

Australians already struggling with a rising cost of living are bracing for more pain, as many homeowners will see ultra-low fixed rate mortgages expire in 2023. Thousands of home loans taken out in mid-2020 are due to roll over before the end of the year at much higher interest rates, with some homeowners facing repayments that could soar by up to 65 per cent. Get budget-ready for a fixed interest rate roll over and avoid paying “loyalty tax” with these 5 tips.

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1.    Check when your current mortgage term ends.

Check your mortgage contract to find out how long you have before your mortgage term ends and ensure you’re clear on what happens if you take no action before then. In most cases, you’ll automatically be moved over to your lender’s standard variable interest rates if you don’t do anything. So, to ensure you get the best interest rates available to you, contact your lender or mortgage broker to discuss your options before your term ends.

2. Find out if you can rate lock early.

Depending on your lender, you may be able to lock in a new rate in advance of your fixed rate roll over. Rate locking your fixed interest rate home loan before your loan term ends means you can take advantage of current favourable interest rate deals and protect yourself from possible future interest rate rises. However, if interest rates fall before your current deal ends, you may not be able to cancel your rate lock once it’s been accepted. Check with your lender or mortgage broker to find out if rate locking is an option and how flexible it would be.

3. Talk to your mortgage broker about refinancing.

Get financial advice from a mortgage broker who has a finger on the pulse of the current property market and access to a panel of lending options. As well as financial advice about your specific financial situation, mortgage brokers can help you compare your existing mortgage with those available in the market, so you can make informed decisions about whether to refinance or refix.

4. Budget for the increase in repayments

Many Australian households are struggling to keep up with the rising cost of living as basic expenses become more expensive. Having to budget a larger portion of income on non-discretionary items like food and petrol is further exacerbated by higher mortgage repayments.

Before a fixed interest rate roll over, it’s important you work out exactly how much your mortgage repayments will increase by and find ways to balance your income and outgoings. Use a home loan repayment calculator to work out your new repayments at the current interest rate and factor the extra cost into your household budget.

A strict budget is key to navigating tougher financial times, while saving on everyday expenses and car costs like fuel, insurance, and servicing could help lessen the effects of mortgage repayment increases.

5. Don’t get stuck paying loyalty tax.

Having a “set and forget” mindset and staying with the same lender for the sake of convenience could end up costing you in higher fees and interest charges. It’s not uncommon for borrowers with older mortgages to be paying higher interest rates than those with new mortgages, as lenders entice new borrowers with better deals. A regular review of your mortgage and the help of your mortgage broker to compare mortgage deals and see how yours’ stacks up could help you avoid paying loyalty tax.

Find other ways to save.

If you haven’t reviewed your mortgage in a while, there’s no better time than right now to book in a catch-up with your mortgage broker. Find out about the latest refinancing offers, cash backs and fixed interest rate deals that could help you save money and shave years off your home loan.

While all care has been taken in the preparation of this publication, no warranty is given as to the accuracy of the information and no responsibility is taken by Finservice Pty Ltd (Mortgage Express) for any errors or omissions. This publication does not constitute personalised financial advice. It may not be relevant to individual circumstances. Nothing in this publication is, or should be taken as, an offer, invitation, or recommendation to buy, sell, or retain any investment in or make any deposit with any person. You should seek professional advice before taking any action in relation to the matters dealt within this publication. A Disclosure Statement is available on request and free of charge.

Finservice Pty Ltd (Mortgage Express) is authorised as a corporate credit representative (Corporate Credit Representative Number 397386) to engage in credit activities on behalf of BLSSA Pty Ltd (Australian Credit Licence number 391237) ACN 123 600 000 | Full member of MFAA | Member of Australian Financial Complaints Authority (AFCA) | Member of Choice Aggregation Services.

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