Navigating the Mortgage Cliff: Why Rolling Over to a Default Rate Might Not Be Best for You

The term ‘mortgage cliff’ might sound ominous, and for many homeowners, it signifies a looming financial shift that demands attention.
man sitting on cliff

The term ‘mortgage cliff’ might sound ominous, and for many homeowners, it signifies a looming financial shift that demands attention. As a large number of homeowners approach the end of their fixed-rate terms, the specter of rolling over into potentially higher default rates becomes a pressing concern. In this evolving landscape, understanding the implications of the mortgage cliff and seeking the guidance of a mortgage broker can make all the difference.

The Perils of the Mortgage Cliff:

When a fixed-rate mortgage term concludes, loans that aren’t refinanced or renegotiated will usually transition to the lender’s standard variable rate, commonly referred to as the ‘default rate’. More often than not, this rate is higher than both the expiring fixed rate and other competitive rates available in the market 1.

The implications of this are twofold:

  1. Increased Monthly Repayments: Shifting to a default rate often means higher monthly repayments, straining household budgets.
  2. Lost Financial Opportunities: By not exploring other available rates, homeowners might miss out on substantial savings over the lifespan of their loan.

The Mortgage Broker Advantage:

This is where the expertise of a mortgage broker becomes invaluable. Brokers have a holistic view of the loan market and can quickly compare various loan options to identify the most suitable ones for individual homeowners. Here’s how they can assist:

  1. Time-saving Loan Comparisons: Instead of homeowners trawling through countless loan offers, a broker can streamline this process, presenting options that align with the homeowner’s financial situation and needs.
  2. Cost-free Expertise: One of the standout benefits of using a mortgage broker is that their service typically comes at no direct cost to the homeowner. Brokers earn their commission from lenders when they successfully match a homeowner with a loan product. This means homeowners can tap into the broker’s expertise, market insights, and negotiation skills without worrying about service fees 2.
  3. Guided Decision-making: Beyond just finding competitive rates, brokers consider loan features, flexibility, and other factors to ensure homeowners make a decision that serves them in the long run.

Making the Right Choice:

The mortgage cliff is a reminder of the importance of proactive financial management. Rolling over to a default rate without exploring other options can have lasting financial implications. By partnering with a mortgage broker, homeowners can navigate this transition with confidence, equipped with the best information and loan options available.

If you’re nearing the end of your fixed-rate term, don’t leave your financial future to chance. Engage with a mortgage broker to ensure your next step is a step forward.


  1. RBA Bulletin: The Matured Profile of the Australian Mortgage
  2. MoneySmart: Using a Broker

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