Things to consider when coming off fixed rates

If your fixed-rate loan is about to expire, there are several things you can do to prepare. Often, making a plan early is the key to reducing the impact.

With interest rates increasing, many homeowners would be forgiven for feeling a bit anxious about the end of their fixed-rate term. After all, some borrowers could end up paying thousands of dollars a month more.

The good news is there are several ways to prepare for the transition to make it a smoother event. Here are some of our top tips.

1.Test your ability to pay more by putting extra money aside.

Using a mortgage calculator, look at how much extra you’re likely to be paying when the fixed term ends. Then, think about trying to put that amount aside in a high-interest savings account.

The process should indicate how much your budget will be tested – and how you might fare when the higher rate kicks in.

2. Rethink your spending.

If the extra money really challenges your weekly or monthly budget, think about whether adjustments can be made in other parts of life to ease the pressure. One popular budgeting strategy involves going through your monthly statement and highlighting every item you could cut out the following month.

‘Quick win’ ideas include reducing spending on takeaway food or eating out and cancelling subscriptions for a few months. If you’re a union member, you could also investigate what discounts you’re eligible for and see if you’re taking advantage of them.

3. Look at other fixed-rate loans.

When your fixed term ends, your loan will automatically be moved to a variable rate; however, you have the option to fix your loan again. Given how the official cash rate has moved in the past nine months, the new fixed rate you will be offered is likely to be higher than your last one.  

But if you’re tipping rates to rise further in the future and have enjoyed the certainty of a fixed loan, you could consider moving to another fixed term anyway. Police Bank offers two-year fixed rates at 5.59 per cent per annum – which is less than many of our competitors.

4. Speak to us about extra support.

If you’ve done the sums and feel like you’ll face financial hardship when your fixed term ends, have a chat to a Police Bank representative. We’re here to help and can come up with some further suggestions for you.

Remember, if you’re struggling, you can also speak to the National Debt Helpline on 1800 007 007.