Are you coming off a fixed interest rate?

Learn how you can plan for increased interest rates and repayments.

Doctors in their new propertyA new year brings new resolutions and changes, and unfortunately for some, this may mean an interest rate shock.

In 2022, the RBA raised the cash rate a record eight times, closing the year at 3.1% – its highest level in ten years. Despite this, many Australians found themselves unaffected, having fixed their rates in 2020 and 2021, when cash rates were at a historical low of 0.1%.

However, this is all about to change with the RBA predicting that around 23% of home loans – almost $500 billion worth – have fixed rates and these will expire by the end of 20231.

Borrowers in this position will no doubt be wondering what this change may mean for their pockets and lifestyles. Especially if there is the potential for further rate rises in 2023. RBA governor Philip Lowe, stated, “The size and timing of future interest rate increases will continue to be determined by the incoming data and the Board’s assessment of the outlook for inflation and the labour market”2.

It is suggested a homeowner with a $1 million mortgage currently paying $4209 a month (fixed rate) could see their repayments climb to $6932 if they were to roll on to rates of 7.16%3. This is almost a 65% increase.

Planning for the switch

To ensure a smooth transition, fixed-rate borrowers are encouraged to:

1. Consider financial circumstances, goals, and the economy

Look at your current expenses and cash flow, then consider what they may look like following a rate increase. Try to live as if your rates have risen.

Will you comfortably afford these increased repayments, plus other everyday expenses? What about with another rate rise? Will such changes impede you from achieving goals?

2. Review home loans at least three months before expiry

Sufficient time is crucial to assess, research, negotiate and implement required changes to mortgages. If ignored, borrowers will switch to a variable rate, which is often considerably more than the cheapest discount rates available from their lender4.

Need help reviewing your loan?

Avant medical finance experts can save you time, money, and stress by reviewing your loan.

Having a rich understanding of the medical industry and its professions, Avant can explain clients’ career trajectories to prospective lenders, some of whom offer preferential treatment to doctors. This is because lenders are still enthusiastic about low-risk borrowers, and such favour will benefit borrowers looking to negotiate a new rate or refinance. Additionally, the team has an extensive network of lenders to shop around with in order to help you find the most competitive and suitable financial solution available to you.

Request a free consultation here.




1 https://www.afr.com/wealth/personal-finance/interest-rate-shock-just-around-the-corner-20221122-p5c0gr#:~:text=The%20RBA%20estimates%20that%20around,by%20the%20end%20of%202023.

2 https://www.forbes.com/advisor/au/personal-finance/interest-rate-news/

3 https://www.news.com.au/finance/economy/interest-rates/370b-worth-of-fixed-rate-mortgages-to-end-in-2023-causing-pain-for-aussies/news-story/ade2d81e71c766c31dae2b19a4129364

4 https://www.abc.net.au/news/2022-12-09/fixed-rate-ending-soon-here-is-how-to-prepare/101749410

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