Property expert says homeowners impacted by the end of fixed rate mortgages should sell now

Homeowners considering selling should act quickly and list their properties to prevent prices from “falling off a cliff,” a leading real estate expert warned.

The expiration of fixed-interest terms on an estimated 880,000 Australian home loans this year means many borrowers will be forced to sell because they cannot afford their new, higher repayments, Anna Porter told Daily Mail Australia.

Repayments based on terms of around two percent, going back several years, will be recalculated by lenders at variable rates of six or even seven percent.

That would add up to $1,400 a month on a modest $500,000 mortgage.

The expiration of fixed-interest terms on an estimated 880,000 Australian home loans this year means many homeowners will be forced to sell as they cannot afford their higher repayments

“If fixed-rate loans are paid off between now and the end of the year, it will put a lot of pressure on households to sell,” says Ms Porter, an appraiser for 15 years and now the real estate investment advisory service Suburbanite.

“If many people go through this affordability crisis and put their homes on the market in rapid succession, there will be an oversupply in the market.

“Maybe it’s people who need to sell quickly and take a lower price. Such cases put downward pressure on prices and house values.’

Ms Porter advises that the time to sell is now, not six to 12 months from now, because the number of listings is so low that sellers are more likely to get close to their asking price.

New listings in most markets are down compared to the same time a year ago, including Melbourne (-20 percent), Brisbane (-32.2 percent) and Sydney (-18.4 percent).

“National quotes are still 22 percent lower than the same period last year and it is this lack of competition that is currently driving prices up,” says Porter.

“There is less competition in the market across the board, making it the perfect storm for sellers to capitalize on and get a better price.”

As a result, although house prices have cooled, they are still higher than they were at the start of the pandemic.

Corelogic reported that national house prices in March 2023 were 14.8 percent higher than in March 2020.

The median house price in Kogarah, Sydney’s southwest was $1,163,750 in April 2020 and is now $1,570,000.

Although housing prices have cooled, they are still higher nationwide than they were at the start of the pandemic as the number of listings has fallen

In Prahan, Melbourne’s eastern suburb, the median price is now $1,713,500, compared to $1,575,000 in April 2020.

Higher interest rates on home loans are one of the biggest costs households have tried to absorb as the cost of living has skyrocketed over the past year.

The Reserve Bank of Australia has steadily raised cash rates for 11 of the past 12 months.

While the rate was 0.1 percent in April 2022, it was 3.85 percent at the beginning of May.

With each monthly increase, lenders passed on the rate increases to customers.