Rolling off your fixed rate

“My fixed rate is ending, and I’m worried about my new variable rate and repayments” - this is becoming a daily phone call for the Sphere Home Loans team at the moment, with a large number of clients concerned about their mortgage repayments increasing significantly once they have rolled off their current fixed rate. But the good news is that there’s no need for alarm.

Re-fixing is generally the first thought our clients have, however when you fixed your rate initially the fixed and variable rates may have been much closer together, or the fixed may have even been lower. Something to consider is, now that the fixed rate is higher than the variable, will this be the best choice for you?

Fixing is great for certainty of repayment and to remove doubt, but in the current climate it will come with some immediate cost. We are finding that a lot of clients are enquiring about what the 2 or 3-year fixed rates are, and then instead of fixing, they make their repayments at this rate. This allows them to get used to and budget for these increased repayments, but instead of giving extra money to the banks they are saving it themselves as a buffer. Either way, we need to budget for these higher repayments. We can look at options of re-fixing at a higher rate, leaving variable and possibly mitigating the risk by paying extra, or we can do a combination of the two.

Another thing to consider when rolling off a fixed rate is that you can always negotiate! Whether it be with your existing lender or looking to refinance elsewhere there is always room for negotiation on the rate that you have been rolled over to. We are finding now that many lenders are willing to discount variable rates to retain their customers, as opposed to losing them to their competitors. The key to this process is the wording, “I’d like to speak to your retention team please”. That will always get you off to a good start. For more tips on how to have this conversation just give us a ring.

Refinancing can be beneficial if there is a substantial saving, especially when combined with a lender “cash back”. For those of you who are concerned it’s always worthwhile exploring alternative lenders and options, as there is quite a difference in rate from lender to lender. Furthermore, when it comes to valuations, the loan to value ratio can have a significant effect on the interest rate offered by the bank and this too can vary lender to lender. It’s important that you’re getting the right advice and placing yourself with the right lender and structure when looking at refinancing.

For a lot of people at the moment it’s an uncertain and somewhat daunting time, especially with these rate rises, but this uncertainty and fear in regard to rolling off your fixed rate can be mitigated to some extent by the above options, and as always, when in doubt make contact with your broker.

We are always here to help, even if it’s just a chat.