It’s set to be a tough Christmas for households. RBA’s rise of 0.25% means households will be paying an extra $71 a month on an average 25-year $500k variable rate mortgage.
What should Aussies do in light on the news?
We have been telling homeowners on variable rates to move quickly in finding a more affordable mortgage for several months, and this has never been more urgent. There’s a real risk that thousands of homeowners could get locked in an avoidable mortgage prison.
There isn’t long until Christmas so anybody who needs to lower the mortgage needs to speak to a broker to have a chance of settling before the lenders shut down for the holidays.
There’s a real risk that the RBA will raise rates again at the start of January, adding even more money to monthly payments and reducing the amount that homeowners can borrow. There’s also a significant number of fixed rate mortgage holders whose ultra low mortgage rates are set to expire over the coming months and may struggle to find an affordable rate.
If your loan is expiring in the next two months, reach out to a broker and get your finances in order. If it’s already expired or your variable rate is getting uncomfortable, act now.
What does this mean for the lending landscape?
It’s not all doom and gloom. We’re seeing that some lenders are moving their fixed rates closer to the variable rates. That starts giving both buyers and existing homeowners more choice, which is very welcome. Fixed rates also allow you to use a rate lock option, meaning your rate won’t go up if the lender raises the interest rate before you settle your loan.
It could be an unpredictable 2023 so anything that can give homeowners a little bit of certainty is welcome. There’s also some high cashback offers available as lenders look to attract new customers. One lender is even offering up to $10,000 cashback – although you’ll need a loan of $2m or over to access it. This is where it really pays to work with your broker.
There are some very attractive cashback offers up to around $4,000 for people who owe less than a million on their mortgage, but it’s really worth getting some expert help so you’re not just seduced by a headline figure and end up on an uncompetitive product.
Lance Goodman is the CEO of personal finance marketplace company Compare Club.
