How to Prepare a Fixed-Rate Mortgage Ending
Do you have a fixed-rate mortgage contract coming to an end soon? It can be a stressful time, so here are some tips for a smooth transition.
Like many Australians, you may have taken advantage of the interest rate good times by locking in a great rate. But as they say, good things must come to an end.
The Reserve Bank of Australia (RBA) has estimated that 800,000 fixed rate loans will end this year.
Here Are Some Useful Tips for Smoothly Transitioning to Higher Repayments
Crunch The Numbers
Variable interest rates have been rising, and you can expect that your mortgage repayments will follow suit once your fixed-rate loan contract ends.
Do you know how much extra you may have to pay each month? And where will you find the extra money?
Giving your budget a clean-up now may put you in a better position to decide what loan product will suit you going forward to help you meet your repayments. Consider cutting back on non-essentials (such as streaming services, takeaway coffees, alcohol, restaurants) and look for cheaper offers on your big tickets bills such as insurance and utilities.
Doing this now can also help you save up a buffer that will ease your transition to future higher loan repayments.
Negotiate Your Rate
One of the worst things that you can do when moving off a fixed-rate loan is to simply accept the variable rate your lender will automatically provide.
Lenders are more likely to offer attractive rates to new customers, not their existing ones. This is referred to as the “loyalty tax”.
Before your fixed-rate contract ends, let us talk to your lender and let them know that you are exploring your options. To keep you on board, they may make an offer that you find acceptable.
Do You Want to Refix?
Continued rate rises are expected in 2023 and, depending on your situation, you may wish to refix your loan.
You could also consider a split loan, where part of your loan has a variable rate, and the other part is fixed. That said, not all lenders will allow you to refix all or part of your loan. If you want a fixed or split loan and your current lender will not provide it, then you may want to explore your options elsewhere by refinancing.
Is It Time To Refinance?
If your existing lender does not come up with a better option for you, then refinancing is an option. Refinancing may get you access to rates and features that banks use to woo new customers, and it could save you thousands.
According to 2022 PEXA data, refinances saved an average of $1,524 per year. The ACC reported in 2020 that mortgagors with 3 to 5 year old loans paid an average of 58 basis points more in interest than new lenders.
If you are considering refinancing, you may want to act sooner than later. With house prices falling, it is important to make sure you have enough equity in your home to refinance.
Frequently Asked Questions
How Can I Prepare for My Fixed-Rate Mortgage Ending?
You can prepare by crunching the numbers to understand how much extra you may have to pay each month. Consider cutting back on non-essentials and look for cheaper offers on big-ticket bills like insurance and utilities to save up a buffer for future higher loan repayments.
What is the "Loyalty Tax" and How Can I Avoid It?
The "loyalty tax" refers to lenders offering better rates to new customers rather than their existing ones. To avoid this, negotiate with your lender before your fixed-rate contract ends to explore better rate options.
Should I Consider Refixing My Loan?
Depending on your financial situation and the expected rate rises, you may consider refixing your loan. Some lenders also offer split loans, where part of your loan has a variable rate and the other part is fixed.
What Are the Benefits of Refinancing?
Refinancing can give you access to better rates and features that banks use to attract new customers. According to 2022 PEXA data, refinances saved an average of $1,524 per year.
How Can Zippy Financial Assist Me in This Transition?
Zippy Financial can help you crunch the numbers, negotiate a new rate, and assist with refixing and/or refinancing. Acting early gives you plenty of time to explore different options for a smooth transition.
What Should I Do Before My Fixed Rate Ends?
It's advisable to talk to a mortgage broker before your fixed rate ends. They can help you explore different options and find a solution that allows for a smooth transition to higher repayments.
Talk to us
Come and chat with us before your fixed rate ends, not after! We can help you crunch the numbers, negotiate a new rate, and help with refixing and/or refinancing. Acting early means that we have plenty of time to explore plenty of different options for you and help you find a solution that will allow for a smooth transition.
Phone: 1300 855 022
Zippy Financial is an award-winning mortgage brokerage specialising in home loans, property investment, commercial lending, and vehicle & asset finance. Whether you are looking to buy your first home, refinance or build your property investment portfolio, the team at Zippy Financial can help find and secure the right loan for you and your business.
About the Author:
Louisa Sanghera is an award-winning mortgage broker and Director at Zippy Financial. Louisa founded Zippy Financial with the goal of helping clients grow their wealth through smart property and business financing. Louisa utilises her expert financial knowledge, vision for exceptional customer service and passion for property to help her clients achieve their lifestyle and financial goals. Louisa is an experienced speaker, financial commentator, mortgage broker industry representative and small business advocate.
Connect with Louisa on Linkedin.
Louisa Sanghera is a Credit Representative (437236) of Mortgage Specialists Pty Ltd (Australian Credit Licence No. 387025).
Disclaimer: This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information. This article is not to be used in place of professional advice, whether business, health or financial.
