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Aussie borrowers on a fixed rate home loan are at risk of falling off an "unprecedented" mortgage cliff with their repayments more than doubling when the fixed term of their loan expires.
With around half of all fixed-rate loans expiring this year, or $350 billion worth, with the switch to variable rates is expected to hit homeowners hard.
Canstar research found homeowners who took out a loan on a $500,000 mortgage in 2021 at around 2.21 per cent could see repayments rise by 63 per cent from $1200 to $3101 per month.
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For borrowers who chose a three-year fixed rate in 2020 and were locked into 2.61 per cent on their repayments, it could now cost up to 53 per cent more on a $500,000 loan with costs increasing from $20004 to $3074.
It comes after the central bank raised the cash rate to 4.10 per cent in June from just 0.10 per cent in April 2022.
The interest rate pain isn't expected to ease yet with two of the four big banks, NAB and Westpac, forecasting the cash rate to continue rising in coming months signalling further struggles for homeowners.
Canstar's finance expert Steve Mickenbecker said fixed-rate borrowers coming to the end of their term are facing an "unprecedented" mortgage cliff with their repayments almost trebling overnight.
"Fixed-rate borrowers have not had the past year to acclimatise to higher interest rates," Mickenbecker said.
"They have avoided the pain of adjusting their budget for higher loan repayments but will be on the receiving end of the Reserve Bank's 12 cash increases over the past year all in one huge hit.
"To help cope with the inevitable higher repayments, any borrower with a fixed period still to run should be making the necessary adjustments now and be putting themselves ahead with extra repayments."
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Mickenbecker warned it will only get worse for borrowers if the central bank decides to hike the cash rate again in July.
"The latest inflation numbers are encouraging and probably enough to stay the Reserve Bank's hand from another cash rate rise in July. If the more robust quarterly inflation data released in July doesn't confirm the trend towards the Reserve Bank's two to three percent inflation target, we can expect further rate hikes," he said.
"The labour market is very tight with the lowest unemployment rate in decades, and this will feed wage pressure into the inflation rate. It doesn't look as if the Reserve Bank's job is done yet."
Mickenbecker urged borrowers coming to the end of their fixed-rate period to consider switching to a different rate to find a better deal.
"Fixed rate borrowers with a loan due to expire this year should be checking their loan contract today to understand what rate they can expect when the fixed term ends and confirming it with their lender," he said.
"Most will be suitably shocked."
Canstar research shows 80 per cent of borrowers with a two-year fixed rate could find a lower variable rate of up to 5.24 per cent or repayments of $2074 per month on a $500,000 loan.
The research also showed 60 per cent of borrowers locked into a four-year fixed-rate could find an even lower rate of 4.94 per cent instead of the average of 6.57 per cent
This would mean repayments on a $500,000 loan could be $2644 instead of $3106.
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"It's likely that the rate borrowers will move to at the end of a fixed term will exceed today's average variable rate, as the interest rates that fixed rate loans automatically roll into are generally set by banks in their favour," Mickenbecker said.
"There will almost inevitably be better deals available with your current lender or a competitor. Now is the time to market yourself around.
"Refinancing into one of the lowest interest rate loans will ease the higher repayment burden and is a must for every borrower. It won't save borrowers altogether from repayment pain, but it will provide hundreds of dollars that won't have to be found elsewhere in the family budget."
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