As the cost of living in Australia continues to rise, many homeowners are facing the expiration of their ultra-low fixed rate mortgages in 2023. For those who fail to take action, they may be in for a shock as they are moved onto their lender’s standard variable interest rates, resulting in increased repayments of up to 65%. To avoid paying unnecessary “loyalty tax”, it’s important to prepare for a fixed interest rate roll over. Here are five tips to get budget-ready:
- Check when your current mortgage term ends and find out what happens if you take no action. Contact your lender or mortgage broker to discuss your options before your term ends to ensure you get the best interest rates available to you.
- Find out if you can rate lock early. Locking in a new rate in advance of your fixed rate roll over means you can take advantage of current favourable interest rate deals and protect yourself from possible future interest rate rises.
- Talk to your mortgage broker about refinancing. They can help you compare your existing mortgage with those available in the market, so you can make informed decisions about whether to refinance or re-fix.
- Budget for the increase in repayments. 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. Saving on everyday expenses and car costs like fuel, insurance, and servicing could help lessen the effects of mortgage repayment increases.
- Don’t get stuck paying loyalty tax. Regularly review your mortgage and compare deals to avoid paying unnecessary fees and interest charges. A mortgage broker can help you with this and ensure you’re getting the best deal available.
Preparing for a fixed interest rate roll over may seem daunting, but taking these steps can help you avoid financial stress and ensure you’re getting the best deal available to you.