So, were you one of the lucky ones who managed to secure your fixed interest rate when they were at historic lows (in many cases, under 2%)?

Well, those good times are set to finish at the end of 2023, and if you’re not careful, you might find yourself in a precarious financial position.

The fixed-rate mortgage cliff is coming, and there is no stopping it… It’s also important to note that we will not see rates like those again (if ever).

Now is the time to a) take advantage of your low fixed rate and pay your mortgage down as much as possible, and b) start planning for when your rate does expire and what you need to when it comes to an end (refinance with your existing bank or look elsewhere).

One thing we always tell our clients – your bank will not be loyal to you – and if they had their way, they’d gladly wait for your fixed rate to end and either slot you straight onto their standard variable rate (which could be into the sixes) or let you fix again at a much higher rate.

As an existing client, in many cases, you’ll find that new customers are the ones getting access to competitive discounted rates (leaving you, the loyal customer, kicking the can if you’re not careful).

Being vigilant now, paying your mortgage down, and keeping across when your fixed rate expires are strategies we recommend to our clients.

This allows you to take the time to fully understand the ramifications of your new rate when it does come to an end and lets you begin forward planning for when it’s time to refinance.

Just to give you some context on the cost of being complacent if you do not take the time to assess your options and refinance if necessary – the below table showcases the extra costs of transitioning from one of the pandemic special rates to what the new normal is now – and believe us, it’s uncomfortable reading:

The complacency cost is well addressed in this article on realestate.com.au – depending on your loan size, it can result in you paying tens of thousands of dollars per year. 

As outlined in the table above, going from a 1.99% to a standard variable rate of 6.8% can result in you paying $1,414 more per month instead of just $625 if you refinanced at the lowest possible rate at the time (4.29% as of 15/9/22). 

So, if you’re one of those people on a discounted rate (and it’s set to expire next year), now is as good a time as any to chat to MAW Money.

We’ll look at your current rate scenario and some potential outcomes when your fixed rate expires.

There’s nothing wrong with a bit of forward-planning and certainty, right…