According to the Reserve Bank of Australia, around 880,000 fixed-rate loans are due to expire this year alone and another 450,000 are due to expire throughout 2024.

If your loan happens to be one of these you have likely been enjoying the benefits of comfortably affording your repayments at a very competitive rate. Coming off this rate, will you be ready to afford much higher repayments once the fixed rate period of your home loan ends?

Facing this harsh reality without being adequately prepared can be quite a shock! Fortunately, we are here to provide you with our guidance and support so you can be confident to make the transition as smooth as possible!

Preparing for your fixed rate ending

If you still have a few months left before the fixed rate period of your home loan comes to an end we have great news! There are quite a few things you can do to be in an optimal position before it expires. However, if time is not on your side, do not despair! There is still hope,

Choosing to come up with a plan as early as possible will help you make the most of your existing rate protecting your peace of mind in the future. Although it is not your only option (we will discuss your options later in this blog), it definitely will provide you with much more control and flexibility to make the right choices.

So, what should you keep in mind as you prepare yourself for this transition?

1. Understand how your loan repayments may change once your fixed rate period ends

In current market conditions, most borrowers will be coming off rates around the 2% figure jumping straight into variable rates of about 6%.

What this specifically means for your monthly repayments will vary mainly based on your total loan amount and loan term, but just as a quick reference, a $500,000 loan with a 25-year loan term might result in an increase of about $1,102.24 in monthly repayments.

Our handy loan comparison calculator can help you assess what your new monthly repayments may be under current market conditions, helping you have a clear starting point to come up with a plan.

Although our calculators can help you get a rough understanding of what the future might look like for you, working closely with your Rise High broker will always be your best bet. As your trusted experts, we can help you assess what kind of rate you might realistically be able to lock in taking into consideration the offers and incentives made available by our panel of over 70 lenders! We can make those calculations for you and make suggestions to suit your individual needs and preferences.

2. Reduce your budget

With a clearer picture in mind, it is now time to put a plan in place! Reducing your budget can be a fantastic strategy for two main reasons:

• It can help you ease off into living with less before it unavoidably becomes necessary
• It can help you save an emergency buffer in case you need it for future repayments OR help you contribute more towards the repayment of your loan NOW (which we will discuss in more detail on Tip #3!)

Taking the time to sit down and have a look at your expenses can help you identify areas in which you might be spending unnecessarily.

Although it might seem trivial at first, your daily cup of coffee or home delivery order might be placing a big strain on your finances more than you imagine. These can become great opportunities to re-adjust your budget and discover ways to spend more wisely.

3. Increase your repayments NOW

Once you have reduced your budget you can make the most out of the extra cash by actually increasing your repayments now! Doing so can help you get used to what will likely become your new repayments, and will help you decrease your total loan amount, saving money in repayments in the long term (since you will be covering these at a much lower rate).

It is important to keep in mind that some banks do have limitations on how much extra you can put into your fixed-rate loan. Working with your Rise High broker to know what the limitations are and how your efforts will reward you long-term can be a wonderful way to stay motivated and ensure you are in optimal condition for this transition!

What can you do when your fixed rate ends?

If time is not really on your side and your fixed rate is expiring in the next month or two, there are a few options you can consider.

Option #1: Do nothing

Let’s start off by discussing what will happen if you choose to do nothing.

Once your fixed rate ends your bank will revert you to a much higher rate. This will work wonders for the bank as you will end up contributing much higher repayments and supporting their business. For you, this will perhaps be less stressful at first, as there is no research or homework to do, but does come at a very costly price long-term.

Doing nothing will ensure you end up contributing a significantly higher amount for your loan. As an example, a client with a $600,000 loan whose rate has shifted from a 2% fixed to a 6% variable rate will end up paying at least about $396,805 more throughout the lifetime of their loan!

Unless you are in the position to give your money this freely, we highly recommend NOT choosing this option. It might take a bit of extra work, but it truly will pay off in the long run. For all our Rise High clients, we are very pleased to say we do keep the fixed rate expiry date of your loan on our diary to make sure we can touch base and discuss your options. Since option #1 is one we would most definitely not recommend, what other options could you explore?

Option #2: Get the best rate possible with your lender

If you are super happy with your existing lender and wish to stay loyal to them our best advice is to get in touch with their retention team to try and get the best rate possible.

Often, having a quick phone call with them will do the trick, but if you are not feeling confident about approaching this situation on your own, your dedicated Rise High Broker is here to help! We can support you in this process by guiding you about the right way to approach this conversation or do the call on your behalf depending on the lender to negotiate your new rate.

At this stage, you do have the option of switching across to a competitive variable rate or looking at fixing your loan again at the new rate offered. Our team can assist you in evaluating these options, so you can be confident to make the right decision!

Option #3: Consider refinancing

If you are not particularly attached to your existing lender or are keen to shop around and get a better idea of what other lenders might be offering, refinancing can be a great option to explore!

Refinancing will allow you to have a full review of your loan, understand whether it is still working for your needs, take into consideration diverse loan features and most importantly, identify what the most competitive rate is in the current market based on your unique circumstances and goals.

Working closely with your mortgage broker is the best way to ensure you get this right! With years of experience supporting thousands of Australians to achieve their financial dreams and goals, we can assist by providing you with access to curated insights covering our extensive panel of lenders and our expert advice!

Should you consider cashbacks?

With thousands of Australians shopping around to find the best rate possible banks are engaging in fierce competition to keep and attract new clients. Cashback offers are one of the great incentives currently floating around on the market, and can be helpful if your fixed rate is ending and your budget is currently feeling the squeeze!

As attractive as these may be, they do come with a word of caution. Choosing to get those $3,000 or $4,000 from a cashback offer might come with an added cost: a rate that may not be as competitive as others in the market.

At Rise High we can help you understand the long-term implications of these choices. Although your cashback might help in the short term, the benefit obtained might not offset the long-term cost of keeping that loan. Our loan cashback offers blog might help understand what you should keep in mind before saying yes to that offer!

At Rise High, we understand that navigating the complexities of your home loan and property investment loan can be overwhelming. Our team is always here to support and guide you, so you can feel empowered to achieve your financial goals!

If you are looking for specific advice based on your current circumstances and the state of the lending market, please do not hesitate to reach out! We look forward to working with you to find the right option!