TIPS FOR WHEN RATES ARE RISING
ASK FOR A BETTER DISCOUNT
Banks pricing discretion changes all the time and typically we find that we can sharpen up your discounts in a rising rate cycle. Put us to the test to get the latest increase neutralised and perhaps a bit more.
CHANGE YOUR PRODUCT
Do you have a standard variable rate product? Do you really need it? We can get really good rates on “basic” loans and these rates are a good margin below that of your standard variable product. Typically, the only feature they don’t have is an offset account. Hit us up if you want a review on whether having your offset account is saving you money or in fact, costing you money.
The bank will have assessed your borrowing capacity at 2.5 – 3.0% p.a. above the actual rate you were paying when your loan settled. Assuming you have had no major changes to your financial position in the meantime, you should be able to handle the increases.
REVIEW YOUR BUDGET
A lot of our monthly living expenses are non-discretionary and a lot of them are going up. The ones we can look at trimming include;
- Streaming subscriptions. Do you need Foxtel, Netflix, Stan, Disney, Amazon Prime, spotify, apple music to entertain yourself each month?
- Insurances – When was the last time you reviewed these and got some quotes from alternate providers?
- Have you been using that gym membership? 😊
- Plan your meals to limit eating out or buying lunch every day
With recent property price rises, you may have equity in your home that you can use to your advantage to consolidate expensive smaller debts such as car loans, personal loans and other unsecured loans. This can save you lots of interest which is important, but it can also improve your monthly cashflow significantly.
INCREASE YOUR REPAYMENTS
Sounds strange I know, but if you can afford to increase your repayment by more than what the previous interest rate rise required, this will get you into the habit of making the extra repayments before you are forced to.
Have you looked at your interest rate recently? A lot of people don’t know what rate they are paying. Of course they don’t like it when the RBA increase the cash rate and the banks tell them their rate and monthly repayment is going up, but you might have been paying a higher rate than you needed to for a long time. If you haven’t had your home loan rate reviewed for a couple of years, it is quite common we can reduce your rate by 1% p.a. which might just cover off on all the increases in this cycle.
It's been over 10 years since we have been in an upward rate cycle but it was bound to happen. We have had great times with low interest rates and high property growth in recent years and this unfortunately could not last forever. Be open to making some changes to your budget and making a concerted effort to review all expenses and you will be amazed how quickly you can recoup the increase in your mortgage repayments.
If you are experiencing financial hardship, please get in touch and we can point you in the right direction to get hardship provisions implemented with your bank.