With the RBA raising interest rates yet again last week, I’m hearing the whispers growing louder. People are talking about a looming mortgage cliff.
Whilst we enjoyed several years of record low interest rates, many home owners chose to fix their mortgages. They effectively locked in that lower rate for 1-3 years, some even longer.
However, many home owners are now facing the challenge of their fixed rate mortgages ending. When this happens, their monthly mortgage repayments will jump significantly.
And that is the mortgage cliff. RBA’s own internal data research shows that if the official rate hit 3.6 percent, just over half of all home owners on variable mortgages would see a 20%+ reduction in spare cash flow, IE, cash leftover after their mortgage is paid.
With the most recent interest rate hike, we are not sitting at 3.35%. I suspect some belts will be being tightened even further as we move into 2023.
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