Fixed rate mortgage cliff looms for 891,000 Australian homeowners

Almost 891,000 Australian mortgage holders who locked in low fixed rates during the pandemic are set to roll onto variable rates that are nearly three times higher in the next 12 months, according to new research by Finder, Australia’s most visited comparison site.

A Finder survey of 1,012 respondents, including 292 mortgage holders, revealed that 27% are due to come off a fixed rate in the next year, exposing them to the impact of the fastest and largest rate hiking cycle on record.

Sarah Megginson, personal finance expert at Finder, said, “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,” she said.

The survey also found that a further 21% of mortgage holders, or around 693,000 households, have already rolled off cheap fixed rates in the past five years, with many struggling with sky-high repayments.

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

With the Reserve Bank of Australia’s next interest rate decision just days away on June 18, 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 it.

“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,” Ms Megginson said.

She urged Australians in mortgage stress to discuss hardship arrangements with their lender, 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,” Ms Megginson said.

The Finder survey was based on responses from 1,012 people in May 2024, 292 of whom have a mortgage. It is part of Finder’s Consumer Sentiment Tracker, a monthly recurring nationally representative survey of more than 60,000 respondents that has been running since May 2019.