Australian mortgage holders just experienced a ninth consecutive interest rate rise and borrowers on a fixed-rate may be facing a sharp spike in repayments as loan terms end.
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Hundreds of billions of dollars in fixed-rate home loans will expire by the end of 2023, according to the Reserve Bank of Australia (RBA).
That means borrowers moving to a variable rate after their fixed loan terms end could be facing an interest rate jump of three to four per cent, the RBA has said.
"This will mean that there's an impact on the monthly balance sheet," UNSW business school associate professor Kristle Romero Cortés told ACM.
More than seven in ten Australians surveyed said they were concerned about coming off a fixed term rate, according to a survey by Honeycomb Strategy and Mortgage choice.
The survey also found that 55 per cent out of more than 1,000 Australian home loan holders in the sample group already felt financially stretched.
"We're concerned about how many older Australians, who may be on a pension or budgeting for retirement, are approaching the so-called 'fixed-rate cliff'.
"If they're not financially prepared for the increase in their repayments, it will come as a nasty shock," Mortgage Choice CEO Anthony Waldron said.
"The research showed us that home loan repayments are already the biggest monthly expense for 80% of people," Mr Waldron said.
"Financial stress is already an issue, and each interest rate rise exacerbates the problem further," he said.
"Look at other options and other banks," UNSW associate professor Cortés said.
Borrowers, shopping around for a new fixed rate, may now be potentially more attractive to banks because of increases in their home equity and a decrease in their total outstanding amount.
The survey found 16 per cent of homeowners didn't know what they'd do at the end of their fixed-rate period, and 21 per cent said they would shop around for a new rate.
