While it may seem like a distant memory now, two years ago home loan rates were being lowered everywhere. Locking in your mortgage rate was an excellent opportunity for many people.

Since then there has been a significant shift in the interest rate landscape, with mortgage rates broadly following the perpendicular path of the official cash rate. As a result, homeowners who fixed a portion of or all of their loan during 2020 or 2021 will see their repayments rise sharply once their fixed rate ends.

What are the options that you should, or could, be considering?

Review your budget

A borrower’s first step should be to determine by how much their repayments will likely increase. Now, the possibility of more interest rate hikes from the Reserve Bank of Australia (RBA) may throw a spanner in the works in terms of working out exactly what interest rate the loan will revert to, but even a rough estimate can help when it comes to readjusting a?budget?to account for those higher repayments.

Look at where your money is going and see where you can cut back and once you’ve taken a look at your spending, it can be useful to group your regular income in accounts. There are plenty of budget planners available. If you need help let the Holzworth Partners team know.

Negotiate a better rate

Not happy with the competitiveness of the interest rate you’re going to be paying when your fixed rate expires? There’s no harm in trying to negotiate a better deal with your existing lender.

If you are attempting to negotiate, come prepared with comparable offers from other lenders and taking a stance that you’re willing to walk away.

Consider an offset account

Fixed-rate home loans don’t commonly offer offset accounts, but they aren’t unheard of. It’s worth asking about if you’re planning on switching to a variable or split rate once your fixed rate expires.

If you don’t have an offset account, you should consider setting one up. Offset accounts are linked to standard variable rate home loans and investment home loans with money deposited into them reducing the balance on which interest is charged. Borrowers who did manage to stash some money away in a?savings account?during their fixed rate period may also want to consider the benefits of moving it into an offset account. This can result in a more effective use of the money if the loan rate is higher than the savings rate.

Think about refinancing

You may want to consider refinancing if negotiating a better deal with your existing lender does not yield results. You could save a lot of money by refinancing your loan. With so many cash-back offers and great rates on the market right now, it really pays to shop around when it comes to home loans.

By working with a broker like Compass Brokerage at Holzworth Partners, we manage the application process for you, outlining exactly what you need to do moving forward and providing tailored advice along the way. We help you secure the right loan from the right lender, in the most efficient way.

Reach out if you need help

Given the size of the jump in repayments that many borrowers coming off low fixed-rates are going to experience, and taking into account other cost of living pressures being felt at the moment, it’s inevitable that some borrowers will find it difficult to meet their higher mortgage costs.

If you think you’re going to?struggle with your repayments, ASIC’s Moneysmart recommends getting in contact with your lender and their financial hardship team as soon as possible to discuss options like temporary payment reductions or mortgage holidays. Homeowners in the ACT and Queensland experiencing mortgage hardship may also be eligible for government-backed mortgage relief loans.