Warning to homeowners amid 2023 ‘mortgage time-bomb’ scare

Australian homeowners are being urged to prepare for massive financial obstacles which are set to hit at the end of 2023.

Australian homeowners are being urged to brace for inevitable mortgage interest rate hikes in the lead up to Christmas next year, which could create a situation which being described as a costly “mortgage time-bomb”.

Despite the Reserve Bank’s efforts to ensure Australian families are in an ideal situation to finance their home loans, an whopping $158 billion worth of fixed rate loan expirations is set to hit by December 2023.

Mortgage owners are being warned to brace for interest rate increases by the end of 2023.

It comes as the RBA announced it would increase the official cash rate to 2.35 per cent, up by 50 basis points.

This is the fifth consecutive month interest rates have risen, burdening families already effected by the cost of living crisis.

In research conducted by Finder.com.au, the average yearly repayments could increase by over $10,000 as fixed terms expire.

Transitioning to the variable rates, then, will cost an extra $641 in monthly repayments for the typical owner.

The RBA has increased interest rates for five months running. Picture: NCA NewsWire /Brenton Edwards

Head of consumer research at Finder, Graham Cooke, said more cash rate hikes will set average Australian homeowners back another $801 per month compared to what they were paying in April.

Mr Cooke told NCA NewsWire combinations of increasing expenses are adding pressure to Australian families.

“Interest rates have already risen five times in five months, adding nearly $10k to the average mortgage. On top of this, petrol, energy and grocery prices are skyrocketing due to many inflationary pressures,” Mr Cooke said.

“While it’s not as bad in Australia as it is in some other countries, these elements are combining to pile even more pressure onto Aussies families,

“Any further rate increases will, inevitably, increase that pressure even further – especially for any families who borrowed heavily while rates were low.”

Rising interest rates will add an extra $3.5K onto an annual $600k mortgage. Picture: NCA Newswire / Gaye Gerard

Mr Cooke said a panel of economists had indicated the cash rate hike would hit 3 per cent on average before declining.

“If true, this would add an additional $3.5k to the annual cost of a $600k mortgage, on top of the $10k increase we have already seen,” he said.
“Some economist predictions for the rate peak were as high as 5 per cent,” he said. “Strap in.”

Sally Tindall, RateCity research director, said consumers would be confronted with a completely different home loan market.

“When they roll off the rate, they could have triple the rates they had when they were on a fixed rate and see their monthly repayments surge by hundreds,” she said.

Finder.com.au’s suggestions for reducing mortgage stress include:

– Assessing monthly spending and reducing expenditure on unwanted costs;

– Create, and stick to, a budget;

– Start a side hustle for extra income;

– Downsize primary residence, downsize cars;

– Refinance with a lower interest rate.