Fixed-rate cliff explained
There’s been an enormous amount of finance, property and tax news since my last newsletter. Here are four of the biggest stories right now:
- Fixed-rate cliff explained
- ATO warns property investors
- Regulation coming to BNPL
- Tax scam warning
Australia’s mortgage market is experiencing a significant shift, with many homeowners coming off two-year and three-year fixed-rate loans onto much higher variable rates today.
Starting during the 2020 pandemic, there was a boom in fixed-rate borrowing, as lenders slashed their fixed rates to record-low levels and many borrowers took advantage. At the peak, almost 40% of outstanding home loans in early 2022 were fixed, which was “roughly twice their usual share from prior to 2020,” according to a research paper published by the Reserve Bank of Australia (RBA).
As of March 2023, about 25% of fixed-rate loans outstanding in early 2022 had expired. By the end of 2023, another 40% will expire; and by the end of 2024, another 20%. This is what the media has been referring to as the ‘fixed-rate cliff’.
Here are three tips if you’re about to revert from a fixed to a variable loan:
- Start budgeting right now for higher interest rates
- Contact me to discuss whether you could refinance to a new lender with a more suitable fixed or variable rate
- Limit your spending to increase your chances of qualifying for a new loan
SWITCHING FROM FIXED TO VARIABLE? LET’S TALK
I hope you got a lot of value from the newsletter. If you need help to buy a property, purchase a vehicle or refinance a loan, don’t hesitate to get in touch.
Kind Regards, Shahmir Naqvi 0401 265 254
Disclaimer: The information provided above is on the understanding that it is for illustrative and discussion purposes only. Any party seeking to rely on its content or otherwise should make their own enquiries and research to ensure its relevance to your specific personal and business requirements and circumstances.
