For many mortgage holders and potential borrowers, the consistent waves of interest rate rises are uncharted waters.
The Reserve Bank of Australia raised the cash rate for the first time in 11 years in May and it has gone from 0.1% to 1.85% since then.
The cash rate increase directly impacts the interest rate on your home loan and that affects how much you’re repaying in interest each month. As per our calculations, if the interest rate on your repayments increases from 3% to 3.5% (assuming the loan amount is $800,000), then your repayments would be $3,592 a month, $43,104 annually and $1,293,249 over 30 years.
However, borrowers do not need to be alarmed by the rate rises. Lenders take a higher interest rate when assessing your ability to make your mortgage repayments. Most borrowers should find that, at this point, they can still make their repayments, unless their financial situation has changed for the worse.
But that does not mean you should be complacent.
Rising interest rates are an unavoidable circumstance. Fortunately, if you have an expert mortgage broker on your side, you will be well prepared for any rate rise in the future.
How A Mortgage Broker Helps You With Rising Interest Rates
Here’s how a mortgage broker can help you with rising rates:
- Assess your current situation by calculating where you will stand if rates rise and helping you find solutions that will put you in a better financial position.
- Refix, revert or switch lenders if your fixed term is ending. A mortgage broker can complete a pricing request to determine the best option.
- Help you refinance to a lender that offers you a competitive interest rate. Do not stay loyal to your current lender if the loan does not fulfill your needs.
- Negotiate with your lender on your behalf to get you a competitive deal.
- Show you options to help you work out whether a fixed or variable home loan would be best for you.
- Help consolidate debts to make them manageable.
- Make use of an offset to lower interest paid.
Apart from altering your home loan, there are simple steps you can take to prepare for a rate rise. Make changes to your lifestyle and pre-emptively cut unnecessary expenses. Do not live beyond your means, as you may risk defaulting on your repayments.
At Home Loan Experts, our mortgage brokers can prepare you for a rate rise by refinancing or making changes to your home loan. Call us on 1300 889 743 or enquire online today.