Two years ago, we saw a spike in mortgage holders choosing to fix in their home loans as rates plummeted in the wake of the COVID 19 pandemic. Fast forward to now, some borrowers are facing the reality check of what the mortgage market looks like as their fixed terms are expiring and their home loan rates are now significantly higher.

How does a Fixed Rate work?

A fixed rate loan has a guaranteed interest rate for a specific term and as such is not affected by rate fluctuations. They are usually somewhat more restrictive than a variable rate loan with the capacity to pay more into the loan or access redraw limited or not available at all. And as the borrower enters a contract with the lender to pay a certain amount of interest over the set term there may be costs incurred should the loan be paid out prior to the end of the fixed term.

What happens when your Fixed Rate Expires?

When the fixed term expires the loan will simply roll on to the revert variable rate at the time, which will probably not be the most competitive in the market.

So, what are your options?

Reprice your current loan

Have your mortgage broker approach your lender to see what additional interest rate discount they are willing to offer. This can achieve substantial savings in many cases and will be applied almost instantaneously once the discounted rate is accepted.

Refix your loan

Review your lender’s current fixed rates and see if they are worthwhile considering taking into account your individual circumstance. If you choose to refix, a simple request can be forwarded by your broker on your behalf. Alternatively, some lenders allow you to do it via your internet banking.

Refinance

If your current lender’s offering does not stack up well compared to the rest of the market then your mortgage broker can guide you through your refinance options, assuming you qualify to do so. With many lenders offering sizable cash-back incentives to win your business it can work out to be extremely beneficial to refinance your lending.

If your fixed rate loan has expired or is about to, we strongly urge you to contact your Blackburne Mortgage Broker to review your options to ensure you have a cost-effective and suitable loan moving forward.