It's known as the race that stops the nation, but this year it just may be the rates that stop the nation's spending in its tracks.
The Reserve Bank of Australia is largely expected to increase interest rates at 2.30pm on Tuesday afternoon, particularly in the wake of larger-than-expected inflation figures the week prior.
The last time the central bank moved to increase rates on Cup day was in 2010, when after five months of pauses the nation's top economists announced a 25 basis point rise to 4.75 per cent.
READ MORE: Inflation in Australia hits near 32-year high
This afternoon's decision - at least from market pundits - is not as clear-cut.
Many are expecting the RBA to continue with its 25 basis point hikes, to take the current cash rate to 2.85 per cent.
But others are predicting much worse: a 50 basis point hike could be on the cards to serve as an inflation "stop gap".
Whatever the decision, the greater issue impacting borrowers is not month-to-month increase but the estimated $99 billion worth of mortgages coming off fixed rates between July and December next year.
"Borrowers who locked in ultra-low fixed rates could see their repayments skyrocket by up to 65 per cent when their fixed term ends," Sally Tindall, research director at RateCity.com.au, said.
"People on a fixed rate shouldn't put their heads in the sand, but instead take action while they can.
"Instead of dreading the day your fixed rate ends, consider testing out your budget now by making these higher repayments while your rate is still low."
READ MORE: Aussies need a $6600 pay rise to keep pace with inflation
If the average owner-occupier with a $500,000 loan fixed their rate in July 2021 for two years, they would be paying around 1.94 per cent.
When that rate ends in July next year - using an average revert rate of 7.18 per cent - if the same borrower did not negotiate with their lender they could be facing a 65 per cent increase in payments or an extra $1365 a month.
RateCity.com.au analysis shows that even those who do negotiate could be looking at $1000 extra a month when they come off their fixed rate mortgage.
READ MORE: Property prices to drop by up to 20 per cent
Tindall said the onus was on borrowers to prepare for the financial reality that lays before them.
"Borrowers on a fixed rate should stay on their toes as they get close to the end of their term. Put a note in your diary at least two months before your fixed term is due to end, so you can start searching for a better deal," she said.
"Lenders are eager for refinancers and will continue to put sharper rates on the table for borrowers willing to make the switch."
The information provided on this website is general in nature only and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information on this website you should consider the appropriateness of the information having regard to your objectives, financial situation and needs.
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