Today’s announcement by the RBA sees interest rates rise by another 0.25%, adding around $30 per month for every $100,000 borrowed. With the average mortgage size hovering around $600,000, that’s an extra $180 per month.
Today’s rate rise is the seventh consecutive hike this year. Together, they have taken the cash rate from a record low of 0.10% to 3.10% since May 2022. Against a background of spiralling food and fuel prices, it’s no wonder that Australian households are feeling the pinch.
However, there are still some things you can do to cope.
Debbie Ettridge, Elders’ Head of Home and Commercial Finance, says it’s all about cash flow.
“Right now, there are a lot of demands on the family budget. However, it’s important to remember that not all of these pressures will be long term. The RBA has a clear goal in mind when raising interest rates. The raises are intended to support the economy at large by influencing Australians to curb unnecessary spending and thus lower inflation. Once inflation starts to return to normal levels, it’s likely that some of those budget pressures will ease.”
Therefore, says Debbie, the important thing is to talk to your broker about options that can help you get through this challenging period.
“Our brokers have access to a panel of over 60 lenders, meaning that we can offer a much wider range of options than your local bank. We’ll take a holistic view of your financial situation to see what option is suitable for you. You might want to move to a fixed rate loan, keep it variable or hedge your bets and split between the two.”
Debbie also recommends looking at your loan package as a whole, and not just focusing on the interest rate. “An offset account can save you a substantial amount of money if your finances are set up correctly.”
However, there is no one-size-fits-all approach. “Whether you’re self employed or traditionally employed, a first home buyer, investor or second time buyer – all of these variables will inform the advice we give you. Elders Home And Commercial Finance Brokers specialise in tailored advice. And because we have access to such a large range of products, you can be confident that we’re exploring all the options for you,” says Debbie.
Quick tips to keep on top of your mortgage
On top of talking to a broker and ensuring you’re on the best possible deal, there are some other simple things you can do to help.
Pay fortnightly instead of monthly
Your lender will calculate your fortnightly repayment amount at half of the monthly amount. However, since there are 26 fortnights in a year you will end up making two extra payments that will come straight off the principal of the loan and save you future interest.
Send windfalls straight to the vault
End of year bonus? Healthy tax return? Unless you’re relying on that money to meet a commitment, consider sending it straight to your home loan. As it’s not regular income, you won’t miss it as much, and it can help pay down your principal faster.
Do a budget spring clean
Now’s a great time to look at your spending as a whole. Are there any subscriptions you no longer use? Insurance policies that could be renegotiated? Lazy spending habits that need tightening up? Most of us have a few places where we could improve. Once you’ve put those into action, consider sending the difference towards overpayments, thus creating a cushion.
Book a property appraisal
Even if selling isn’t on your mind, it’s a good idea to know where your property sits in the market. You may be able to unlock some equity either to refinance your loan or to dip your toes into the investment market.
This Spring, when you book a property appraisal with Elders real estate you’ll go in the draw to win a huge $20,000 off your mortgage. Now that really will take the pressure off!