Here are our top three tips to help manage your mortgage repayments
When the Reserve Bank of Australia announced a 0.25 percentage point increase to its cash rate last week, with an immediate impact on interest rates, nobody was terribly surprised. It’s the first rate rise in 11 years and a genuine attempt to clamp down on skyrocketing inflation.
For many Australians this will be the first time they’ve experienced an interest rate rise. And whilst it came as unwelcome news for many, it was not unexpected.
Unsurprisingly, the big four banks moved soon after to announce this increase would be passed onto their customers which in turn had an immediate effect on the mortgages of many hard working Australians.
In reality, this would see mortgage repayments on a $500,000 loan increase by about $68 a month.
But it has got many of us thinking about what we can do to keep our mortgage repayments as low as possible and plan for further expected rate rises over the next few years.
Being forewarned and forearmed is always a good idea when it comes to the bottom line, so here’s our top three tips to help reduce interest rate pain.
If you’re thinking about switching home loans, start by telling your current lender that you’re trying to get a cheaper loan. They might want to keep your business and reduce the interest rate on your current loan – it’s definitely worth having the conversation.
If this doesn’t work out, it’s a good idea to set some time aside to shop around and to consider potentially locking a portion of your home loan into a fixed rate. This process can take some time and there’s usually a bit of paperwork involved, but it’s possible to make significant savings on your interest rates and fees giving you cheaper home loan repayments every month.
Be aware that there can be hidden costs in switching your mortgage to a new lender so make sure you do your homework, check your calculations and read the fine print so you understand all the costs involved before you refinance.
Examine your budget
There’s no doubt the cost of living (how much money it takes to buy necessary items) is one of the biggest topics of conversation right now. Covid-19 has played a role in driving up the cost of living in Australia, but there are a few things you can do to reduce your expenses that could help your finances.
But first you need to carefully understand where your money is going each week so make a budget and stick to it.
Shop around – especially on energy. This is a big part of everyone’s household budget and it’s often where you’re not getting the best deal.
Recent state government analysis showed that 7/10 households were not on the cheapest plan and were paying hundreds of dollars more per year than they needed to be. Those dollars are better in your pocket instead of the big energy companies.
You can also save by doing simple things like tracking your spending, writing a detailed menu plan and shopping list before you buy groceries. You can also sell things you no longer use or need that can have significant value to others.
Finally, some of the best things in life are free! Local councils and other organisations run many activities at no cost that can actually be great fun – especially for kids.
Seek financial advice
Nothing beats expert advice. Your financial circumstances may be complex and talking with a professional can make all the difference.