Although interest rates are expected to finally rise sooner rather than later, it’s important to get organised now and ensure you’re ready for the changes.
On average, Australian house prices experienced a whopping 22% increase over the course of 2021 – the strongest annual growth the nation has seen since 1989. Nevertheless, what goes up must come down. According to Westpac, skyrocketing property rates are predicted to stall across the nation by May and even drop by the end of the year.
However, it’s worth noting that these reductions were not expected to happen until the RBA increased the cash rate. With buyers reaching the limits of what they can afford, banks reducing how much they will lend, and more properties being listed for sale, house prices in capital cities like Sydney and Melbourne have begun to drop anyway in anticipation of rising interest rates.
Four Ways To Prepare For Rising Interest Rates
For prospective home buyers and existing property owners alike, the timing and magnitude of any changes to interest rates will often be closely watched. Even the smallest increase could mean hundreds of dollars more in mortgage repayments per month, so it’s important to have a game plan as a means to protect yourself against these types of rising costs.
Should interest rates rise by as little as 1%, it can have massive ramifications on the everyday cost of living for millions of Australians. As an example, if your mortgage has a home loan principal of $500, 000, expect to pay an additional $269 per month. Although some households can easily absorb the hypothetical $67.25 per week as just another expense, others aren’t so lucky – but what can be done about it?
Home Loan Health Check – Before you start panicking about how increases to interest rates will affect you, it’s a good idea to make an appointment with your lending provider or mortgage broker. In simple terms, a home loan health check is a free discussion or “check up” aimed at fine tuning all the complexities involved with your current mortgage.
Consider Fixed Rates – It’s not uncommon for lenders to offer lower rates to entice new customers, but fail to look after their existing customers with the same benefits. Banks are not known for their loyalty, so ensure you know what’s on offer and don’t be afraid to ask for the best possible interest rate structure, even if that means opting for fixed over variable.
Use Your Offset Account – Making extra repayments to your mortgage or syphoning off extra money into a separate account or your offset facility could pay dividends in the long run, especially if your current interest rate is sitting lower than what it traditionally would be. In simple terms, getting ahead with your mortgage is one key way to avoid future stress.
Explore Refinancing – When done well, refinancing your home loan offers a wide range of potential benefits to borrowers, such as securing a more favourable interest rate, changing loan terms to fixed or variable interest rates, gaining access to home equity, consolidating existing debt, and even unlocking certain home loan features like offset accounts.
One of the most common mistakes that people make when it comes to preparing for rising interest rates is that they spend more than they can afford. Thankfully, taking the time to conduct a lifestyle audit via a budget is a relatively easy and straightforward way to get a hold of your finances, and to ensure that your household can absorb any increased cost of living expenses.
If you’re in the market to buy this year or are feeling nervous about the prospect of rising interest rates, it’s worth partnering with the professionals who can help you navigate the ever changing property market – but where do you find them?
Partnering With The Home Loan Professionals
Navigating the complex world of home loans has long been regarded as stressful, frustrating and time consuming – but if you can find the right advice on sourcing how mortgages work, then the good news is that it doesn’t have to be.
Since their inception in 2012, the team at Madd Loans have worked tirelessly in providing over 2,000 Queenslanders with finance options to help turn their dreams into reality. With the entire brand being built on referrals, owner George Samios takes great pride in making the loan process both fun, educational and stress free – and he has a swag of awards to prove it.
If thinking about your financial future strikes a chord with you, then it might be time to speak to a professional. Whether you’re chasing mortgage solutions or a financial fairy godmother, the team at Madd work together as a collective to turn your goals into reality.
