Professionals Real Estate 
The Reserve Bank of Australia (RBA) has lifted the cash rate for the 8th time in a row meaning interest rates on home loans have risen too.
The RBA’s press release from Philip Lowe, Governor, states: “Inflation in Australia is too high, at 6.9 per cent over the year to October. Global factors explain much of this high inflation, but strong domestic demand relative to the ability of the economy to meet that demand is also playing a role. Returning inflation to target requires a more sustainable balance between demand and supply.”
With an increased cost of living, higher interest rates and lots of financial pressure on families, it can be easy to stress about how you’re going to pay for everything. We’ve compiled a list of actionable steps you can take to handle rising interest rates on you home.
- Understand your discretionary spending
The first step to handling any major financial changes is analysing and understanding your discretionary spending. It’s quite likely that with higher mortgage repayments, your amount of disposable income will decrease so it is important to understand where this money is going.
Start this analysis by listing your non-negotiable expenses, such as your mortgage and utility bills. Then list off any non-essential things you’ve spent money on in the last month, such as eating out, clothing, etc. This exercise will help you understand where your money is going, and how you can budget better moving forward.
Speaking of budgeting moving forward, another great idea would be revaluate your entire yearly budget to see if you are living within your means.
A great tool is this budget planner from moneysmart.gov.au. It allows you to work out where your money is going create your own custom expenses and it takes about 10-20 minutes to use.
2. Renegotiate your rate
As of October 2022, the average interest rate is 4.54%; however, the current rates on the market all vary quite widely. Do you have the best deal for your circumstances?
Don’t settle for your current rate if it’s not the best one you could have. Shop around for different banks and lenders to see what they have to offer. Generally, the lower the interest rate, the more harsh the terms and conditions are (40% deposit, anyone?).
Use this mortgage calculator to help you compare your different options. If you need additional help finding the best home loan for you, it might be wise to employ the help of a mortgage broker. They must work in your best interest and help you get the best deal.
3. Make extra repayments
This might not be a viable option for some families, especially with the rising cost of living; however, it is a good idea if you have room for it in your budget. Extra repayments may be able to cut time off your loan, thus reducing the amount you pay overall. Making extra repayments now will also give you some leeway if interest rates continue to rise in the future.
Ensure you ask your lender if there’s a fee for making extra repayments.
4. Pay fortnightly, instead of monthly
If you currently pay off your mortgage monthly, considering doing it every two weeks. By paying 50% of the monthly amount every two weeks, you’ll make the equivalent of an extra month’s repayment each year. Bonus!
We understand this financial climate can be tough on a lot of people, and we want to help in any way we can! We have a team of highly experienced property managers and sales agents who can help you with any questions you have about the market, your investment property or selling/buying. Contact us to see how we can help you!
Disclaimer: The information provided in this publication is intended for general information purposes only, and should not replace the advice of a financial advisor, mortgage broker or any other qualified relevant party. Information may not constitute the most up-to-date or accurate information, and should not be taken as sworn advice. Opinions reflect those of the author and not Professionals Collective as a whole.
