For the first time after 11 years the Reserve Bank of Australia has increased the official interest rate from 0.25% to 0.35% and is expected to grow before the end of 2022. According to Philip Lowe, Governor of Reserve Bank of Australia, these numbers are lower than in most other advanced economies. But, it is higher than what we have experienced in years and higher than what we have expected.
Surprised like many of us, most homeowners are caught off guard who are expecting it lower than 0.20% to be announced by June of this year. This will also affect the buying and selling decisions for the shorter terms. But, for property buyers and owners, is there anything we can do to diminish the effect of an increasing interest rate?
Here are some advice that you can do to soften the impact of the current interest rate rise.
1. Re-evaluate your budget:
Everytime you are expecting or experiencing financial uncertainty it is important to review your budget. It is important that you are able to meet your financial commitments right away and always be prepared to meet possible interest rate changes in the future. Creating a stable buffer in your monthly budget could help you manage rate rise in the future.
You need to check your statement and take note of the recurring bills. Identify your needs and wants. If you think you can live without it then it is ok to cancel that subscription.
2. Search for better deals:
Having to fix on a lower interest rate now could help you save thousands of dollars in repayments on your mortgage in the future. Try to explore options outside your bank. Most brokerages offer better deals for new clients which could potentially save you more money.
3. Review your mortgage plans:
Check your current home loan arrangements and assess if they still fit your finances. Visit your bank or lender and look for additional costs that you are paying or perhaps an offset mortgage available for you that you are not using. It is important that you check in with your broker about your home loan plans at least once every six months.
4. Consider making extra repayments:
With the expected more increase in interest rate this 2022, having some extra repayments before the raise could be beneficial for you. A few hundred dollars of additional payments could protect you when the interest rates rise in the future.
5. Seek for help:
If you think you are struggling to find a way to manage your loan, then talking to your bank or lender should be the first thing you need to do. Banks and lenders are constantly improving, they should be able to offer you help in reducing your repayments. Some offer relief schemes and I will not hurt just to look into one of these. Just remember it is always good to call for professional help
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