For the first time in over a decade, the Reserve Bank of Australia lifted the cash rate from 0.1% to 0.35%.
An interest rate rise will increase the cost of home loan repayments, forcing homeowners to spend more on their mortgages.
With economists predicting more rate rises on the way, here are five ways to protect yourself to make sure you can live with your home loan.
If you’ve had your loan for a few years, chances are it may no longer suit your current needs, and you may be paying more than you should. By refinancing, you can switch to a mortgage with a lower interest rate and features that you can leverage to your advantage.
Fixing your mortgage lets you lock in a rate for a period of time – generally one to five years. During the fixed period, your repayments will stay the same, which gives you peace of mind that your repayments won’t change if rates increase. However, your ability to make extra repayments may be limited, and there are break fees for ending before the end of the fixed period.
If you’re in a good financial position, consider making extra repayments on top of your loan. Even a small amount like $200 a month can make a big difference. Extra repayments help reduce your loan amount and the amount of interest charged on it. They also act as a buffer for any financial emergencies like sickness or loss of a job.
Take time to review your budget and find ways to cut back on spending. If you have any ongoing debts, focus on paying them off. A helpful tip is to pay more than the monthly minimum amount and consolidate multiple debts into one to make them more manageable.
Make an appointment to speak to us to review your home loan and advise if refinancing is right for you.
Give our team a call, and we can walk you through the steps to be prepared for an interest rate rise.