fixed rate cliff set to hit in september
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  • 50% of fixed-rate loans are expected to revert to higher variable rates in September
  • The cost of living continues to rise, with a 28% drop in surplus income this year
  • Refinancing has helped borrowers reduce their interest rates by 0.68%

The peak of the fixed rate cliff is expected to hit in September when more than half of all fixed-rate loans revert to higher variable rates, according to Aussie Home Loans.

The brokerage said one in five mortgage holders will have their fixed-rate loan term end in the next three months, with 50.22% expiring in September. That will also be when those who had a fixed rate will feel the full force of the past 10 interest rate rises.

Tough times for borrowers

Chief Distribution Officer, Aussie Home Loans, Brad Cramb said, borrowers are facing a challenging few months ahead as the impact of higher rates bites.

”Fixed Rate Mortgage holders are likely to be some of the most vulnerable in this situation as they roll off their current rate, requiring added expertise to assist their financial situation”, Cramb said.

The data comes as the cost of living continues to rise with the mortgage broker recording a 28% drop in median net surplus income since the beginning of the year, leaving Australian households facing growing financial pressures.

Despite the RBA pausing their rate hikes at the last meeting, Cramb said refinancing is a good option for many borrowers worried about higher interest rates.

Saving on interest

According to Aussie Home Loans, borrowers could save thousands a year by not remaining loyal to their existing lender.

”Just as households review their daily budgets… in order to save on their family’s bottom line, refinancing is just – if not more – important to regularly revisit,” Cramb said.

“Your home loan interest rate should never be a set and forget option. It can be one of the most effective tools for homeowners to help reduce their financial burden and achieve greater financial stability.

“By refinancing their home loan, homeowners can potentially save money on their monthly repayments and free up cash for other expenses. This is especially important given we’ve also seen a 28% drop in median net surplus income since the beginning of the year.”

Cramb added that many Australians are already taking action, with almost half of New South Wales (NSW) mortgage holders refinancing since January, marking a total of $422.53 million. NSW residents leads the country in refinancing and are followed by 22.75% of Queenslanders and 19.5% of Victorians.

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