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HomeMoneyAre interest rate rises keeping you up at night?

Are interest rate rises keeping you up at night?

interest rate rises

By Tina Howes, Mortgage & Finance Advisor – SmartMove

Let’s put it into perspective…

I keep saying this but when the banks assess your loan, they add three percentage points on top of the actual rate. Some banks even more.

We have only seen 0.90 of a percentage point increase across May and June with a further one percentage point forecast.

While this is not a nice thought, we knew this was coming and there is still some fat in there before we see the full three percentage points.

If you took a loan before the pandemic, chances are your owner-occupied interest rate was in excess of 3.50 per cent. Investment lending even higher. We are still quite a way off before rates get to this level.

If the rate rises are making you rethink your spending, well, that’s good! That’s the whole point of the rate rises. The dampening effect of reduced spending is designed to cool inflation.

Things you can do:

  • Check in with your broker or bank and ask for a review on your rate. Chances are the current lender will reduce it to a competitive level. Banks are under competitive pressure also to not lose customers, so we are seeing a lot of success here.
  • If it’s still not a competitive rate, then look at refinance options. Many lenders are offering refinance rebates also to help offset the costs.
  • If the forecast monthly repayment is still of concern to you, consider refinancing and extending your loan term. You need to have a strong exit strategy here if it takes you beyond your retirement age but if you need some help to get you through this current period then this may be an option for you.
  • If you have some personal debts such as car loans, credit card loans. and have equity in your property, rolling these debts into a loan secured against your home, can give you some cash flow relief with lower repayments, and combined with lower interest rates, allow you to pay off this debt sooner.
  • Review your budget and see where you can cut back on spending to ensure you can meet the higher repayments.

While it is scary, it’s not all doom and gloom and there are options. Feel free to reach out to me on tina@smartmove.com.au  or 0431 007 144.

Tina Howes

Mortgage & Finance Advisor

SmartMove

Main image: Freepik

Tina Howes