Increases in interest rates in Australia can be met in five different ways.

Increases in interest rates in Australia can be met in five different ways.

You probably know that interest rates are increasing. The cash rate has been raised twice by the Reserve Bank, and further hikes are expected. Mortgage interest rates will therefore increase.

So, how should you react?

What follows are five recommendations from my partner EK Capital Director Eren, a specialist Mortgage Broker in Australia 

First, try not to freak out.

Your mortgage would not have been authorised unless your lender was certain you could handle many rate increases. That being said, larger payments shouldn’t be too much of a burden unless your financial situation has worsened since then.

The second piece of advice is to anticipate and avoid potential issues.

If you are having trouble making your payments and need to explore your alternatives with your lender, you should call them immediately. Rather than waiting until after you’ve missed a payment to reach out, it’s in your best interest to do so beforehand so that your lender can be prepared to work with you on a repayment plan.

Third, plan for potential rate hikes. Your mortgage interest rate is expected to increase by two percentage points. Find out what your new monthly repayment would be and start making payments immediately. A redraw facility, an offset account, or a dedicated savings account are all suitable destinations for any surplus funds.

4 Raise your rate of savings.

Make an effort to raise your income and decrease your expenditures.

5 Reasons to consider refinancing your current loan.

There is a lot of competition in the mortgage industry, so banks and credit unions will often offer better interest rates to new consumers than they do to established ones. You might save a lot of money by switching to a new lender that offers the same type of loan but at a cheaper interest rate.

 

Please get in touch with us if you have any concerns or would want to discuss your current financial situation.

 

 

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