2022 is seeing interest rates rising at a speed not seen in many years, to levels not seen in a long time – and industry experts predict that there will be further interest rate rises to come in the next 18 months or so. As a result, Australian household budgets nationwide are being stretched to meet higher mortgage and other loan repayment demands. For some householders, this is having a significant and detrimental impact and causing a lot of stress.
There are several ways to approach the challenges presented by the higher loan repayments forced by interest rate rises.
Many Australian homeowners have never experienced high interest rates before, and cutting discretionary spending is, for many, their first step in saving money and trying to reduce debt. This includes consolidating both credit cards and vehicle, personal, and other loans into a single loan with a lower interest rate to simplify processes and save money.
Cutting back on “luxury” expenses is also a common and often first approach – this commonly includes cancelling streaming services, vacationing closer to home, suspending gym memberships, skipping the daily barista coffee, purchasing fewer lifestyle items, and eating out less frequently. All of these options can have negative quality-of-life impacts if enforced long-term.
Saving money (even a small amount) is difficult but important. Trying to put a little money aside (into a separate savings account) each month is highly recommended – even small amounts saved over time add up. The one benefit of higher interest rates is that money you save in a bank or similar will earn interest.
It’s worth considering whether it’s time to refinance your home loan. At the very least, undergoing a professional, expert financial review is highly recommended.
See a local mortgage advisor, such as a mortgage broker in Newcastle, who can work with you to help you:
- Identify areas in which you could save money now
- Understand whether refinancing your home loan is the right option for you now
- Access a wider range of suitable lenders and loan products and identify which is the best fit for your circumstances
- Determine whether a fixed or variable rate loan is better for you
- Access benefits such as home equity benefits, redraw/line of credit facilities, and cashback offers
- Submit applications on your behalf
- Streamline and speed up the approval process
Refinancing your mortgage offers a wide array of potential advantages, no matter how long you have held your existing loan and how much you still owe. Moving to a new lender or another loan product may enable you to avail a lower interest rate and reduce your monthly repayments. It may also allow you to consolidate debt and access any equity you have in your home to free up cash for other purposes – including reinvestment, renovation, a new vehicle or a vacation, and unexpected expenses. You may also refinance your home loan to either increase your overall loan term to reduce your repayments or shorten your term to pay less interest in the life of the loan.
The right mortgage advisor will also alert you to considerations such as lender fees, whether you need to pay Lenders Mortgage Insurance, and any impact refinancing may have on your Credit Score.
Now is not the time to panic about interest rate rises. It is possible to navigate the not-insignificant challenges, with a calm approach and the professional advice and guidance of an expert, reputable mortgage advisor.