800,000 FIXED LOANS ABOUT TO EXPIRE

While many mortgage holders have gritted their teeth and adjusted to the Reserve Bank of Australia’s interest rate hikes over the past nine months, there are hundreds of thousands who this year will have to face the grim reality of a big jump in the cost of their mortgage when their fixed rate terms end.

The RBA revealed to a Federal parliamentary committee up to 800,000 fixed rate home loan contracts, including thousands of borrowers who locked in rates of around two per cent for the past two to three years, will expire by the end of the year. The head of the economic analysis department at the RBA, Marion Kohler, said about a third of outstanding housing credit is fixed rate.

“We think about half of that is due to roll off in the coming year,” Ms Kohler said.

“We understand that some people are finding the rise in interest rates difficult to manage and others will have to cut back on discretionary spending. However, higher interest rates are necessary to ensure that the current period of higher inflation and cost-of-living pressures does not persist too long.”

This situation with fixed rate contracts expiring should not come as a shock to those affected.

People who took advantage of fixed rates at all-time lows as a rule know this has been coming for some time and they will be taking action.

Certainly, there will be some fall out and people struggling to repay their loans may have no choice but to sell their home.

But some will be able to refinance to rates that while not as low as their fixed rate will be more competitive than most variable rates currently on offer.

Others won’t be able to refinance and will be stuck with their current lender.