If you’re like me, and a significant portion of Australians, you probably have a mortgage. Whether it’s a mortgage against the house you live in or the money you borrowed to acquire your first/second/tenth investment property, you’re probably starting to wonder, “when will my interest rate stop going up???” Unfortunately, I don’t have the answer, but it certainly seems that the RBA look set to keep raising rates, at least in the short term.

What does this mean for you?

If you’re one of the lucky ones, you may have fixed your interest rate sometime over the past two years at the historically low rates that were available through almost all lenders. So, you’re safe right? Well for the time being yes but once that fixed period ends the new interest rate that you’re likely to be paying may be as high as 5%. That’s a pretty big increase from the current 1.79% or 1.89% that you’re paying on your $800,000 mortgage!

So, what can I do now?

  • Pay extra while you still can- While rates have increased over the past 3 months, they’re still lower than they are likely to be by the end of the year. So where possible, increase the amount that you are contributing to that mortgage. You can do this by stacking the offset account with more money or paying directly into the loan account (Note- with the majority of fixed loans in Australia you won’t have an offset account, or be able to make unlimited repayments, but check with your bank. You can usually make extra contributions of between $5,000 and $10,000 per annum even if the rate is fixed). If you can manage to save up more than the mortgage currently requires you to pay, you’ll have money there to cover the “increased amount” when the rates increase again
  • Approach your current lender- If you currently have a variable rate mortgage and are paying over 3% before this latest July rate rise, go back and tell your lender that enough is enough. You may find that your current lender values your loyalty (although this isn’t likely) and is happy to reduce your interest rate to a more competitive level
  • Look at other options – Rates are going up, but some lenders are still throwing cash back offers and lower than normal rates at prospective customers to try to entice them into refinancing away from their current lender. Contact our finance team to assist you get a better rate.

It looks fairly certain to us that borrowers are all in for a tougher time in the short term-future, but don’t panic just yet. With any luck, these latest increases to rates will have the desired impact on inflation and the Australian economy, and things will level off early next year.

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