Nabeel’s home loan repayments are about to skyrocket by $1,000: ‘Worrying’

Nabeel purchased his home in Melbourne two years ago, when the official cash rate was still at a record low of 0.10 per cent.

At the time, the IT professional took out a fixed-rate home loan with a 2 per cent interest rate. But that fixed rate will be coming to an end this week and Nabeel will be hit with the full force of the Reserve Bank’s 12 interest rate hikes, following another 0.25 per cent hike yesterday.

“It is obviously worrying. We have been following the news and once you get on a fixed rate you do get some time to mentally prepare as well. Since we haven’t started the journey off the fixed rate yet, we are obviously a bit cautious in our approach to everything,” Nabeel told Yahoo Finance.

• Also read: RBA rate hike: Aussies borrowers to pay $1,134 more per month

• Also read: Mortgage stress at highest level since 2008: 1.4 million Aussies ‘at risk’

• Also read: Interest rates: How to save $12k by refinancing your mortgage

Nabeel said he was preparing for a “considerable” increase in his repayments and was looking into refinancing to a variable-rate home loan, which would have an interest rate in the ballpark of 6 per cent.

“It’s considerable. It’ll probably be close to $1,000. We haven’t done the maths yet but that’s what we are preparing ourselves for,” he said.

Nabeel said he was feeling a “double whammy of pressure” with the rising cost of living and had noticed his groceries and energy prices ramp up for his young, growing family.

“There is talk about more rises, hopefully not, but it is almost scary to think of,” he said.

Homeowners unsure of next move

Nabeel is one of around 800,000 borrowers whose fixed-rate mortgages are expected to end this year, according to the RBA.

New research from Resolve Finance found these Aussies were increasingly uncertain about what to do when their fixed rate came to an end.

Half of borrowers said they would take a “wait and see” approach to their mortgage ending, choosing to stick with their current lender and delay refinancing.

Borrowers aged 45 to 54 were the least likely to refinance at the end of their term, the research found, while younger homeowners were the most likely to take immediate action.

Variable mortgage holders were more proactive in their approach, with the research finding 63 per cent had reviewed their mortgage in the past 12 months. But concerningly, about 18 per cent of borrowers said they hadn’t reviewed their home loans in five years.

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