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Increasing Interest Rates: What can you do about it?

After so much talk for so long, it’s finally happened. Variable interest rates have increased. And not just once, but twice over the last few months. Now that we’ve started to see increasing interest rates, let’s take a look at how this will impact you. And also, what you can do 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 rate hike is going to increase your monthly repayments. Whilst lenders passed on the full RBA rate increase, in the majority of cases, the increase only came into play towards the end of June. So, depending on the timing of your repayment cycle, you may not have yet felt the effect of the most recent rate hike.

You should have received communication from your lender regarding the increased repayments, in addition to this information being 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 recent round of rate increases may not impact you too much – for now, that is. It really depends on how much of your lending is fixed.

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 have a pre-approval in place, depending on how close you are to your maximum loan/ purchase price, the recent rate increases may have impacted your capacity to service the loan you are pre-approved for. If you’re not sure about this, please reach out to us to confirm your current pre-approval still holds.

 

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 start to increase, it becomes super important to conduct home loan reviews regularly. You might have been happy 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 paying voluntarily 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. And since you haven’t had any issues covering your repayments, there’s been no urgency to take on the task.

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.

 

Start the new financial year out on the right foot and book in a home loan review today. You can get started here.

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