Wow, it’s been quite some time since the RBA last raised its interest rates!
I remember home loan rates of 13% and 14% as the 1990’s began, and that’s when we were looking for our first home – YIKES!!
So, I wonder, how would YOU cope if the RBA lifted its rates??
For most of the last 10 years our interest rates have been at historical lows and for a lot of our first home buyers and young families out there, you may never have experienced an “official” rate rise.
Although it is expected that rates will continue to stay low for a while yet, as our economy strengthens a rate rise does become more likely.
How might this effect you, the home owner?? Put simply, it means an increase to your monthly repayments if you have a variable rate home loan.
So how can you prepare for a rate rise?
· Make the most of the lower rates and where you can pay extra into your home loan. This will give you a buffer and also reduce the overall interest you will pay over the life of your loan. Another option is to have an offset account that you can transfer money into. This will also reduce the interest over the life of the loan.
· Review your monthly budget. Reduce those other smaller debts, like credit cards, that carry higher interest rates and free up some cash flow that can in turn be channelled into your home loan / offset facility.
· Consolidate multiple debts into your home loan if you have the equity to do so. You will often find that this will reduce the overall monthly repayment as well as effectively reducing the interest rates on the smaller debts. And again, with the additional cash flow you can pay extra payments to the home loan.
· Shop around for lower rates now while rates are still down. part or all of your home loan debt to a fixed interest rate. An advantage to having a fixed rate over a set period is that you won’t have to worry about fluctuations with interest rates and you will know that your repayments will be the same for that set period. However, you will be locked in for a set period, which if you wish to break will come with a cost. Be sure to be prepared for when the fixed period ends as you will probably face a rise in repayments.
CONTACT GADSDEN FINANCE for a FREE, NO OBLIGATION chat to an industry expert who can help you with strategies to survive any changes in the years ahead.
(03) 5443 9098