Interest rates have been hovering near historic lows for quite some time now, and it becomes easy to forget that what goes down will eventually come back up.
We are seeing inflation rising at a rate far higher than expected by analysts throughout the pandemic. New data from the Australian Bureau of Statistics shows inflation rose 2.1 per cent in the March 2022 quarter and 5.1 per cent annually – the largest increase since the introduction of GST in 2000.
Why is this? The unanticipated war in Ukraine is putting pressure on the global supply of goods and adding to consumer sentiments of uncertainty. All this whilst our local wages growth remains conservative at best. The impact on inflation will force the hand of Reserve Bank of Australia (RBA) to hike the cash rate incrementally throughout the year, starting now.
All four big banks have already taken it upon themselves to raise their interest rates ahead of the RBA and will presumably continue to do so as the cash rate goes up.
While you can’t do anything to change this, you can take action to safeguard your finances by way of your home loan.
Here are some options you could take to protect against the impending hikes:
Refinancing is the process of switching your existing home loan to a different lender or changing loan products. If your lender’s interest rates are on the higher side, you have the opportunity to switch your home loan so you can lock in a better rate. Even with rising interest rates, there are still many competitive home loan offers available for owner-occupied & investment loans and could potentially save you thousands in the immediate long run. Read on to see what’s currently on offer.
Make extra repayments now:
This low-interest rate period we have been experiencing could be a wonderful opportunity to make extra repayments, so that you’re ahead when rates do rise. Making extra repayments can help minimise your loan and reduce the overall interest payable on your home loan. Additionally, this can increase equity to free up cash for future investments or spending.
If you can’t find the funds to make extra repayments, start budgeting. It can be beneficial to track your income and expenses so you can better understand where you can save money and essentially put more towards the mortgage.
If you find you’re spending excessively on things like buying clothes, going out or expensive hobbies, it may be helpful to set a monthly limit to reduce that expenditure.
See the latest interest rates on offer:
- Owner-occupied Fixed Interest Rates: from 2.79% p.a
- Owner-occupied Variable Interest Rates: from 1.89% p.a
- Investment Loan Fixed Interest Rates: from 2.99% p.a
- Investment Loan Variable Interest Rates: from 2.14% p.a
- Refinance cash back: up to $6,000
The best way to set yourself up for success is to outsource to a specialist broker such as Legal Home Loans.
As Australia’s only mortgage broking service for lawyers, we understand your profession and how you can leverage this to your benefit with lenders. With access to over thirty lenders including major and private banks, we’ll help you select a loan that best suits your unique situation. PLUS, as a member of the Law Society NSW, you could get $500 cashback at loan settlement.
Think refinancing could be right for you? Or are you eager to buy a home before rates increase? Chat to us and get ahead of rising interest rates today.