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Fixed Rate Cliff Reality Hits Harder Than Mum's Wooden Spoon

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Introduction

Remember that time you tried to sneak a Tim Tam before dinner and your mum's wooden spoon met your behind faster than you could say "fixed rate"? Well, prepare for déjà vu because the fixed rate cliff is slapping homeowners with a reality that stings even worse.

The Unforgiving Wooden Spoon of Interest Rates

Picture this: Two years ago, you were soaking up the financial sun with interest rates so low they made your credit card blush. Fast forward to today, and the Reserve Bank of Australia (RBA) has taken the metaphorical wooden spoon to interest rates, increasing the cash rate from a minuscule 0.1% to a tear-jerking 4.1%.

The Great Awakening: RBA’s Tough Love

Not unlike a wooden spoon, the RBA’s policy doesn’t discriminate; it's impacting everyone. In 2022 alone, around 590,000 mortgages came off fixed rates. In 2023, that number skyrocketed to 880,000. The interest rate rollercoaster is a ride we're all on, whether we bought the ticket or not.

Soothing the Sore Spots: Action Steps

Buffer Up Before You Suffer Up

Craggle Co-Founder Ben Baume advises treating your fixed rate expiration date like you would the expiry date on milk: don't ignore it. Calculate your future repayments and how they fit into your current budget. This approach gives you the chance to cut out non-essentials that might be as appealing as spoiled milk anyway.

Don't Take the Silent Treatment from Your Lender

You wouldn’t let mum's wooden spoon come down without pleading to do the dishes, so don’t let your lender whack you with a higher rate without a word. Engage in tough-love negotiations. Request a discharge form to let them know you're not afraid to see other people—or banks, rather.

Love the One You're With, or Find a New Sweetheart

If your current lender doesn’t respond to your “We need to talk” move, it’s time to play the field. The greener grass might just be on the other side. Keep in mind that transitioning might come with its own costs, like Lender's Mortgage Insurance, so make sure it’s worth jumping the fence.

Spoonful’s of Reality: Final Thoughts

The fixed rate cliff is swinging hard, and no amount of "please, mum, no more!" is going to stop it. The key is preparation, negotiation, and possibly a bit of lender flirtation. It might be a tough spoonful to swallow but consider it a life lesson in mastering your financial fate.

Disclaimer: The opinions expressed in this article are strictly for general informational and entertainment purposes only and should not be taken as financial advice or recommendations.

Written By

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Johnny Finance

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