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interest rate rises

Are interest rate rises keeping you up at night?

Guest Blog – Tina Howes – SmartMove

Let’s put interest rate rises into perspective: 

I keep saying this but when the banks assess your loan they add 3.00% on top of the actual rate. Some banks even more. We have only seen 0.90% of an increase across May and June with a further 1.00% forecast. While this is not a nice thought, we knew this was coming and there is still some fat in there for before we see the full 3.00%. 

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

If interest rate rises are making you rethink your spending, 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 about interest rate rises

  1. 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. 
  2. 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.
  3. 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. 
  4. 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. Combined with lower interest rates this may allow you to pay off this debt sooner. 
  5. Review your budget and see where you can cut back on spending to ensure you can meet the higher repayments. After all, this is what the interest rate rises are designed to do. 

While it is scary, it’s not all doom and gloom and there are options. 

Feel free to reach out tina@smartmove.com.au  or 0431 007 144 

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