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Almost a third of mortgage holders are expected to come off fixed interest rates in the next 12 months, new research has said.
New research from financial comparison website Finder has found that 27 per cent of those who have a mortgage are due to come off fixed interest rates over the next 12 months, equating to 891,000 mortgage holders in Australia still on a fixed rate.
The financial comparison website surveyed 1,012 respondents, 292 of whom have a mortgage, as part of its monthly Consumer Sentiment Tracker survey.
According to Finder, fixed-rate holders are set to roll on variable rates that are likely to be three times higher than the pandemic rates that were offered when the Reserve Bank of Australia (RBA) lowered the cash rate to 0.1 per cent in November 2020.
Following 13 consecutive interest rate rises since April 2022, the average mortgagor is paying almost $1,400 more in monthly repayments, according to Finder.
The survey revealed that a further 21 per cent of respondents, translating to 693,000 households, have already rolled off a cheap fixed interest rate in the past five years.
The remaining 52 per cent of respondents with a mortgage have not had a fixed interest rate in the past five years.
Finder’s personal finance expert Sarah Megginson said that many Australians still haven’t “experienced the pain of the fastest and largest rate hiking cycle on record”.
She said: “A massive change is coming for those borrowers who were very fortunate to put their rate on ice when they did.
“Rates have been rising persistently over the past two years and are 4.25 per cent higher than they were – but this group has been insulated from the sting, as they locked in their loan just before rates started to climb.”
Megginson said that experts are divided on whether the rate-hike cycle is over, as the RBA still considered whether rates should be increased at the previous board meeting in May. The central bank will hand down its next rate decision today (18 June), with the cash rate expected to hold at 4.35 per cent.
“We expect that many mortgage holders will be unable to meet their monthly obligations if rates do increase, as it would be a huge financial shock,” Megginson said.
Megginson encouraged Australian home owners who are experiencing mortgage stress to discuss hardship arrangements with their lenders.
She said: “There’s options available to struggling customers such as interest-only loans and mortgage holidays until they can sort out their serviceability. For those overcommitted, there’s also the option to rent out a spare room or downsize if they’re not coping.”
[Related: Cash rate hold expected, rate cuts pushed further out]
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