After two years of falling mortgage rates, many borrowers may soon find themselves facing a different reality.
New analysis from Cotality suggests growing numbers of mortgage holders are likely to encounter higher financing costs over the next six to 12 months as loans come up for refixing.
Over recent years, many borrowers benefited from fixing for short terms and repeatedly rolling onto lower rates. However, that strategy is becoming less effective as market mortgage rates move higher.
Cotality Chief Property Economist Kelvin Davidson said the environment had changed significantly.
“Over the past two years, many borrowers were rewarded for staying on short-term fixed rates because they could repeatedly reprice onto lower rates,” he said.
“That strategy has become much less effective as market mortgage rates rise ahead of any medium term OCR [official cash rate] increases.”
Borrowers seek certainty
According to Cotality, wholesale funding costs, inflation expectations and geopolitical uncertainty have all contributed to higher market mortgage rates in recent months.
Mr Davidson said borrowers were already responding to those changes.
Reserve Bank lending data shows floating and short-term fixed lending has become less popular over the past six months, while the two-year fixed rate has become the most popular lending term.
“Borrowers are increasingly prioritising repayment certainty again as refinancing conditions become more uncertain,” Mr Davidson said.
“Many households that previously focused on staying flexible are now weighing up whether rates could move higher over the next one to two years.”
The analysis also found some borrowers who fixed for six months late last year are already facing higher refinancing costs today.
What borrowers should consider
Cotality believes many borrowers have already missed the lowest point in the mortgage rate cycle.
“Current market pricing suggests more borrowers refinancing later this year are likely to move from older, lower fixed rates onto higher prevailing market rates,” Mr Davidson said.
A significant amount of debt is currently floating or fixed and due to reprice within the next six months, exposing many households to changing conditions.
For borrowers, this is a reminder that mortgage structure matters. While no one can predict future interest rate movements with certainty, reviewing your options before a fixed term expires can help you avoid rushed decisions and ensure your lending remains aligned with your financial goals.
With refinancing conditions becoming more complex, now may be a good time to review your mortgage strategy. Contact us if you would like to discuss your upcoming refix, explore your options and ensure your loan structure remains fit for purpose.
