If you're on a fixed-rate home loan - especially one obtained during our favourite pandemic - you may have observed last year's eight-in-a-row RBA cash rate rises quite smugly.

After all, fixed-rate loans ensure you're safe from such increases, right?

Yes, you are but don't let that security fool you as you and the hundreds of other fixed-rate mortgage holders are in for a rude awakening this year when your loan expires.

Let's take a look at what you should expect in 2023.

Why the fuss over fixed-rate loans and rising rates?

All good things must come to an end including the security of fixed-rate loans, wherein your interest rate won't change until the loan period expires, regardless of cash rate ups and downs.

Fixed-rate loans expire after an absolute maximum of 10 years, or most commonly, one to five years.

After that, expect to deal with current interest rates - and after five or more years nicely insulated from changes such as we experienced last year, this can be a nasty shock.

This shock will come regardless of whether you decide to switch to a fixed rate again or "revert" to a variable loan, as your current, or new, lender (if you decide to refinance) will only offer you current rates.

Why is there so much noise about fixed-rate loans ending?

Well, as we said above, fixed-rate loans usually expire after five years or less which means 2022-2023 is the end of the road for any such loans obtained between 2017-2021.

COVID's worst years of 2020-2021 saw a multitude of borrowers rush to the buying fray, thanks to 18 months of extraordinarily low 0.1% interest rates.

However, with interest rates rising eight consecutive times in 2022, these same people will struggle worse than the usual end-of-fixed-rate mortgage holders when their loans expire in 2023.

The nitty gritty statistics of fixed-rate loans

Metropole's Michael Yardney described the pandemic's cheap rates as a "rare period in which fixed-rate borrowing ballooned", with total housing lending and refinancing on set interest rates peaking at 46% in July 2021.

Indeed, in May 2021, the average fixed mortgage rate of three years or less dipped to 1.95% while those of three years and over dipped to 1.99% in February 2021, he said.

"Around 20% of housing lending has been on fixed rates as a result," Mr Yardney explained.

However, as we noted above, around two-thirds of fixed-rate mortgages - which make up around 35% of all outstanding housing credit, including the fixed component of split loans - are set to expire by the end of 2023, according to the RBA's October 2022 Financial Stability Review.

What should fixed-rate mortgage holders expect in 2023?

Expect higher interest rates, regardless of whether you choose to stick with (another) fixed-rate loan or revert to a variable rate option.

Both choices were already experiencing changes in 2022 with CoreLogic noting that new mortgage finance volumes declined 19.9% between May - when cash rates first began rising - and October. 

Variable rates also shifted upwards in 2022, and with fixed-rate loans also set to change as they expire, this makes it very difficult for all mortgage holders to decide what's best for their finances.

"New variable home loan rates for owner-occupiers increased from a low of 2.41% in April to 4.58% in October," CoreLogic head of residential research, Eliza Owen, said.

She added that the December cash rate rise to 3.18% could lead to an average new variable rate of 5.08%.

Ms Owen said this could in turn lead to major "sticker shock" for those rolling to variable loans from fixed-rate ones which had "bottomed out" at 1.95% for those of three years or less.

RBA deputy governor Michele Bullock last year also noted this point saying that fixed-rate mortgage holders will find themselves paying 40% extra in monthly repayments on a variable loan when the bulk of fixed loans end in the latter half of 2023.

Fixed-rate changes could affect all households

The major upward change in fixed-rate holder figures and the bulk expiry date occurring this year leads to another issue that could affect every household in 2023: a sweeping rise in the effects of interest rate rises, which has so far been generally slow.

Small-cap and micro-cap news site, Small Caps, pointed out this problem nicely in a November article last year.

"This delay in feeling the effects of rising interest rates could be one of the reasons why consumer spending has been holding up quite well even as interest rates have been rising, with the signal to rein in spending being delayed by the slower than normal pass-through of rate increases," the article stated.

However, the good news around such delayed effects is that they may have the hard impact on inflation that the RBA has been looking for and be a strong signal for the national bank to slow further cash rate rises.

In Small Caps' words, "the strong signals that the RBA has been sending in the form of higher interest rates have not been getting through as clearly to a large group of borrowers that are still paying off their loans at very low interest rates."

Everything's not lost in the land of loans

We know this has been a rather depressing article and we know the loan land can be a stressful one at the best of times.

But whether you choose a variable or fixed-rate loan, or this lender or that lender, your finances often rinse out the same in the wash.

Interest rates can also change markedly between different loans and lenders and periods.

So, keep that property chin up and remember that when you buy into real estate, you're in it for the long haul.

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