What Does Another Interest Rate Rise Mean For You?
Economists are predicting that there’s likely to be another interest rate rise in the near future. If you’re a homeowner, it’s important to know how this lift in the cash rate will affect you and how you can be prepared. Interest rates have been on the rise consistently since the start of the year with inflation hitting households hard across the country.
Once the Reserve Bank of Australia (RBA) chooses to raise the cash rate, banks and lenders will follow in suit and we will see an increase in home loan rates to follow. It won’t be a standard rate increase across all loans—your increase will depend on the type of home loan you have (fixed, variable or split rate), your current interest rate and how much the lender decides to increase it by.
The exact numbers can vary greatly but as a rough estimation, if you have a loan size of $500,000 then you’re likely to see an increase of around $74, adding the already hundreds of dollars of increases that we’ve seen since May 2022. Homeowners with mortgages of over $750,000 will see their monthly payments go up by over $1,000, the number only getting higher the larger your loan is.
With an additional increase, we’ll be looking at some of the highest cash rates Australia has faced since 2013.
How To Deal With The Interest Rate Rising
You do not simply have to accept the higher interest rate on your property and carry on as normal. There are a variety of options available to you that may help to ease the pain of your mortgage and lead to better savings in the long-term.
Taking the initiative to pay your loan off more quickly will help you to beat projected interest rate increases in the future. Once your total outstanding amount is reduced, the increases will too.
Consider that you may not have to stay locked into your current mortgage with your current lender. Switching lenders is possible and could allow you access a better value rate with more benefits. Keep in mind, however, that making a switch could see you paying some nasty hidden fees so it’s best to do your research before making that call.
When Will It End?
Although the rising interest rates may feel painful in the short term, the RBA is raising the rates in order to combat the cost-of-living crisis and inflation. The idea behind the changes is that everyone will ultimately benefit from a more stable economy and be less likely to feel the devastating effects of inflation.
Unfortunately, current events are encouraging inflation to grow. The recent conflict between Ukraine and Russia, lockdowns in China and the continued aftereffects of COVID are disrupting the supply chain. If these global issues continue, it’s very possible that we will see more increases in rates.
It’s important to note that although the rates have been steadily increasing for the last six months, the numbers are still relatively low when compared to previous eras of financial instability. While you might be feeling the pinch right now, the increases should remain manageable for the time being pending any more changes in the global environment.