Mortgage repayments to double for half a million Aussies

Fixed mortgage rates have already ratcheted up, as illustrated in the next chart from CoreLogic:

While not captured above, variable mortgage rates have also begun drifting higher following the RBA’s 0.25% hike in the cash rate earlier this month.

Steve Mickenbecker from financial comparison site Canstar has warned that around half a million Australians could face a doubling in mortgage repayments when their fixed terms expire over the next two years:

“The rates these people are going to face will rocket,” says Steve Mickenbecker at research group Canstar.

According to Mickenbecker, the collection of borrowers that is smack in the middle of this bubble going through the banking system were those who signed on between April 2020 and November last year: on his estimates, that is at least 500,000 mortgages.

“Half a million borrowers could be facing a doubling and more of their home loan interest rate overnight, as they reach the end of their fixed-rate period,” he says…

Mickenbecker… says the issue will emerge in an entirely predictably fashion three years after the fixed rate boom took off (in June 2020), which works out at midyear next year. It will reach at peak in August 2024.

CBA head of Australian economics, Gareth Aird, made similar warnings in February, estimating that $500 billion worth of fixed rate mortgages will refinance at higher rates over the next two years:

The fixed rate home loan expiry schedule means that over the next two years a very significant proportion of home loans will expire (see chart below for the CBA fixed rate loan book expiry profile). Based on CBA’s fixed rate home loan expiry schedule and share of the market there is likely to be around $A500bn of fixed rate mortgage loans expiring in Australia over the next two years.

RateCity.com research director Sally Tindall also warned that “anyone coming off a fixed rate is going to be in for an almighty shock when they see what the banks have on offer”.

For Aussie households that stretched themselves to the limit at record low rates near the peak of the market, it will be a tough pill to swallow. Some of these households will be forced to sell, while others will be plunged into negative equity as house prices sink.