The vast majority of home loan borrowers who have rolled off fixed rates have managed the transition to higher rates well, and borrowers with fixed-rate loans yet to roll off do not appear materially riskier that those who have already transitioned. This is the Reserve Bank’s conclusion from a review of the impact of the so-called fixed-rate cliff, which it details in the latest Financial Stability Review. Between March 2020 and January 2022, when interest rates were at their lowest, the share of fixed-rate home lending almost doubled and was close to 40 per cent of outstanding housing credit. Since the first increase in the cash rate in May 2022, around 45 of these loans have rolled off onto higher rate loans, with the majority of borrowers opting for variable rate loans. The RBA found that arrears rates for borrowers who have recently rolled off fixed-rate loans have increased slightly from low levels but are not markedly different from the increase in arrears rates among other variable rate borrowers. Arrears rates for borrowers who have recently rolled off fixed rates are also similar to those of other variable rate borrowers, when considered by such borrower risk characteristics as loan to valuation and loan-to-income ratios. Arrears rates for borrowers who have transitioned from fixed to variable rates are higher for owner occupiers than investors. The report said: “This may be attributed to investors tending to have higher savings on average and to the strong growth in rental incomes helping them to partially offset the increase in their borrowing costs.” The RBA said fixed-rate loans yet to roll off have a “somewhat higher share of risky characteristics” than those that have rolled off already. “This reflects that these loans these loans are generally newer, so borrowers have had less time to repay principal and build savings buffers,” the RBA said. Also, current fixed-rate borrowers are expected to face slightly larger increases in their mortgage payments when their fixed-rate loans roll off, compared with those whose loans have already rolled off. At July 2023, around 10 per cent of borrowers who rolled off their fixed rates since May 2022 have faced an increase of more than 60 per cent in their payments. By comparison, around 14 per cent of current fixed-rate borrowers are expected to face an increase of more than 60 per cent in their mortgage payments when they roll off. Nevertheless, the RBA estimates that most fixed-rate borrowers have sufficient income to meet their higher mortgage payments and necessary expenses. It estimates that for around 7 per cent of fixed-rate owner occupier borrowers, their required mortgage payments and essential sending will end up will be more than their incomes. But around two-thirds have savings buffers equivalent to at least 12 months of mortgage payments. The ones with little or no savings are the ones to worry about.