Well, it’s still happening. Variable interest rates are still heading upwards. So the question is, now that you’re starting to feel the effects of the recent increases, what are you doing about it?
First things, first. Let’s work out the impact of increasing interest rates
If you have an existing variable rate home loan, the recent rate hikes would have increased your monthly repayments. Whilst lenders have been passing on the full RBA rate increase, in the majority of cases, they’re been slow to increase the loan repayments. So, depending on the timing of your repayments – and your lender – it’s likely you haven’t yet felt the full effect of the rate hikes. More on this here.
You should have received communication from your lender regarding the increased repayments, but if not, this information should be shown on your internet banking portal. Make sure you know how the rate change will impact your monthly repayments, so you’re not caught short.
If you have some (or all) of your lending fixed, the rate increases may not have impact you too much – for now, that is. It really depends on how much of your lending is fixed.
And whilst you might feel especially smug right now – especially if you were one of the many clients we assisted to lock in a sub 2% fixed rate! – you need to be prepared for the day when your fixed rate period expires and your loan reverts to variable. Whilst we would suggest reviewing your options at this point in time, it’s wise to prepare for an increase in repayments now. So, here is your friendly reminder to continue to conserve your cash and/or think about making additional repayments to your variable rate split (if you have one) to actively reduce your overall debt level.
If you’re in the process of arranging a pre-approval, depending on how close you are to your maximum loan/ purchase price, the recent rate increases may have impacted your borrowing capacity. If you’re unsure about this, please reach out to us.
Assess your options
If you’re not a fan of paying more interest than necessary, then don’t! Simply book in a home loan review with us today and we’ll see if we can find you a more suitable lending option.
Lenders typically provide better rates (often via discretionary pricing measures that aren’t advertised) to new borrowers, and don’t extend these offers to their existing clients. This means that if you established your loan more than a few years ago, there’s a very good chance (read: we’re almost certain) you’re paying a higher rate of interest than you need to.
As part of a home loan review, the first step is to determine if your current lender can provide a better rate as an incentive to stay. If not, we can help you find an alternative lending solution to save you some money.
When interest rates are low, it’s very common for homeowners to become extremely complacent with their loans. Rates are low, you’re easily meeting your repayments, so it’s tempting to not even bother looking into your options?
But as rates increase, it becomes super important to conduct home loan reviews regularly. You might have been happy (and able) to pay a little more interest than you needed to when rates were low. But as rates increase across the board, that ‘little bit extra’ you were voluntarily paying becomes not so much of ‘a little amount’ anymore.
Take action.
When we assist clients for a home loan review, they often admit it’s been something on their ‘to-do’ list for a while.
We get it. Life admin isn’t always fun. You already have enough on your plate. You haven’t haven’t had issues covering your repayments in the past, so there’s been no urgency to take on the additional task of getting someone to review your loans.
We can almost guarantee that the longer you leave it, the more it will cost you.
And once you’ve done the ‘hard part’ by providing us with some information, we’ll do the rest.
