Many mortgage repayments have skyrocketed over the past year as lenders pass on the RBA’s interest rate rises – so how can you get on top of yours? Read on to find out…
Times are tough for many Australians at the moment. A year of successive interest rate rises by the Reserve Bank of Australia (RBA) has seen mortgage repayments increase dramatically, with some home loan customers finding it difficult to meet their new obligations. Even with a 2.5% or 3% serviceability buffer (for pre- and post-November 2021 home loans respectively), interest rates have risen by so much that in some cases, home loan customers have exceeded this threshold. It’s not all doom and gloom, though. There are some practical steps that you can take right now to manage your rising home loan repayments, so let’s explore…
Review Your Household Budget
Aside from increasing interest rates and monthly repayments, the rising cost of living adds another pressure on household budgets. Groceries in particular have increased in price significantly, stretching many household budgets very thin indeed. In these tough times, finding ways to tune your budget to your advantage is key. Especially if it’s been a long time since you last reviewed your budget (or even worse – you don’t have one at all), now is the time. Consider how much you are earning and where you can better allocate your expenses. Some non-negotiable items like bills, essential grocery items, childcare and the like should stay in your budget, with their up-to-date prices considered. From there, address those discretionary expenses and see what you can live without or cut down. It might be eating out at restaurants once a month rather than once a fortnight. Perhaps one of Netflix, Stan, Disney Plus, Binge, Amazon Prime, or another streaming service gets the chop. Whatever the case, be honest with yourself about what constitutes “necessary expenses” and remove things from the budget accordingly. Before you know it, you may find yourself on track to increase your savings dramatically and find yourself ahead of your mortgage repayments!
Refinance Your Loan
There’s scarcely a bad time to shop around for a better deal on your home loan but rising repayments may be a good motivator to get that process started. In this current economic climate, many lenders are keen to attract new customers and are therefore willing to offer attractive deals to get people in the door. Cash-back deals of several thousand dollars are not all that uncommon right now. There are also a number of lenders offering attractive interest rates for new customers (attractive relevant to typical current rates). You may not even need to go to a new lender – sometimes asking your current lender to sharpen their pencil can yield a good result, as they may be willing to review your rate in order to keep you as a customer.
Tackle Other Debts
It’s important to remember that your mortgage may not be the only loan you have that could be impacted by rising interest rates and repayments. Car loans, credit cards, and personal loans are three common examples of other financial commitments that could also be adding strain on the hip pocket. If possible, getting on top of smaller debts and even paying some off can save a decent amount on interest payments. Also, debt consolidation is a viable option for some – combining multiple debts into one, so you have just one interest rate and repayment to take care of. This option isn’t appropriate for everyone, however, so do speak with your financial adviser before making any decisions.
Talk to Your Priority Adviser
An ongoing advice relationship with an adviser at Priority Advisory Group is the key to financial stability and prosperity. We understand your financial position, your goals, and your family situation – and most importantly, we know how to bridge the gap from where you are now to where you want to be. That means no matter what the prevailing economic climate looks like, we can guide you to make the financial decisions that are in the best interests of you and your loved ones. If you would like to speak to us about how to make the most of your financial position and achieve your objectives, please do not hesitate to call us on 02 9415 1611, or get in touch via our website.
We also recorded a podcast recently with two mortgage specialists – Kellie Cowie and Darren Goodman. Hosted by our very own Jina Bao, it’s a very informative and topical 20-minute snapshot on how to navigate rising mortgage repayments. You can watch the podcast here.
Please note the information provided within this article is general of nature and is not a personal advice recommendation. Prior to considering strategies discussed in this article we recommend you seek personal financial advice. Please be aware that, without the benefit of financial advice, you may be committing yourself to financial strategies or products that are not appropriate for your overall personal situation, needs and objectives.
Author: Jina Bao
Jina holds a Bachelor of Commerce/Science (Accounting/Biotechnology) and a Master of Commerce degree (International Finance). Jina has completed a Diploma of Financial Planning. Away from work Jina enjoys spending time with her family, exercising and traveling. She also loves camping and off roading with friends and families.