‘Rate hikes chewed through my $50k pay rise’

the past seven years. The Gold Coast couple own two local investment properties, and last

year bought an owner/occupier home ahead of the birth of their first child in January.

“When interest rates first began to rise, I felt mildly nervous,” explains Taylor, who works for

a bank.

“I knew rates could and would rise in the future and thought my husband and I could

manage the increases comfortably, as I received a significant pay rise in 2022.

“However, I was nervous that we would be saving significantly less than we had been given the increase in repayments.”

The couple’s fixed rate periods on both investment properties came to an end in 2022 –

one in March and the other in July, just in time for the Reserve Bank of Australia (RBA)

to start raising interest rates, which they did in May 2022.

On Tuesday, the RBA announced another rate rise – the ninth in a row, of another 25 basis points, taking the cash rate to 3.35 per cent.

Find budget strategies to manage rising mortgage payments with CompareMoney. Read our guide now

Known as a ‘mortgage cliff’, the moment a mortgage holder’s fixed interest rate period

ends and rolls over to a now much-higher variable rate can spell big financial pain for

homeowners, and it’s something set to affect over 800,000 loans this year, according to

the RBA.

RBA head of economic analysis department Marion Kohler told the senate select

committee on the cost of living the bank estimated about $350 billion worth of loans

would shift from fixed to variable rates this year.

Prefacing her numbers with a warning that they were “a very rough, back-of-the-

envelope” calculation, she estimated interest rates would see the number of loan

facilities rolling off fixed rates this year “in the high 800,000s”.

For Taylor and her young family, the mortgage cliff created a very real financial upset.

“At the time fixed rates were already starting to climb, so there was no point to refix

them,” Taylor explains.

“Our new house has been variable since we settled. Across all three mortgages we’re

paying around $1800 extra per month in mortgage repayments, compared with early last

year.”

She says the hikes, in addition to the drop in pay brought about by taking maternity

leave, have meant that the added funds from her pay rise – which she had earmarked for

savings – will be mostly chewed up in repayments.

“I began maternity leave at the beginning of January and was very conscious of not

spending money unnecessarily,” the 29-year-old continues.

“I made do with the three or four outfits that fit my pregnant body, instead of buying

additional clothes.

“I’m concerned about our savings being depleted over the next six months. I’m trying to

make sure I’m being savvy with my money at the grocery store.

“We’ve started to eat out less, and I’ve tried to work from home more to save on petrol,”

she continues.

And while the young mum has a weeks-old newborn at home, she’s trying to pick up

some extra cash where she can.

“I’ve started to umpire sports casually to make extra money. My husband has put off

maintenance work around the house to save,” she says.

“We’ve also just recently started considering selling both of our investment properties to

reduce the debt on our owner-occupied property.”

While the couple has a good understanding of the theory behind the RBA’s aggressive

rates hike strategy, Taylor believes – like many Australians – the actions are unfairly

targeting the wrong section of the market.

“I am extremely frustrated at the frequency and percentage of rates increases,” she

explains.

“The news tells us the RBA is trying to slow inflation, but spending is at a record high.

“In my opinion, spending is of course going to be at a record high because the cost of living

is so high. It seems the RBA wants to send us broke, rather than help those who are already doing it tough.”

* Surname withheld to protect privacy

Comparison is powered by Fair Comparison Pty Ltd who do not compare all providers in the market, or all products from those providers. News Life Media Pty Ltd and Fair Comparison do not provide credit assistance, advice or recommendations and may receive a fee if you click through, apply, or successfully qualify, for a product displayed. Learn more.