What to do about rising interest rates
This article was updated in Nov 2023 - Information may have changed at the time of reading.
We’ve seen a big increase in interest rates this year, leaving some home owners squeezed for cash flow.
Higher interest rates are in response to persisting global and domestic inflation challenges. The good news is, at the time of writing, inflation in Australia is trending downwards.
So what can homeowners do?
There are a number of simple, smart things homeowners can do to respond to these changes.
1. Keep a cool head.
There’s a lot of noise in the media right now, which can instil fear and panic into households. Understandably, Australians are faced with rising costs across the household budget. But is there cause for panic? No.
The best way to overcome any challenge is with greater focus and resolve. Ignoring the reality or responding in fear will only exasperate the problem.
For starters, look at the reality of your own situation. How much are you paying off your home? What’s your cash flow situation?
AMP Bank Home Loan Repayment Calculator
Many Australians can afford to many small tweaks to their lifestyle budget.
Focusing on what we can control (our own financial household decisions) builds resilience and helps us navigate through the favourable and unfavourable economic seasons of life. And hopefully, we learn from them to be stronger for the future.
2. Assess your mortgage
If property sales in your area have risen recently, it could be a great time to reassess your home valuation with your bank. A higher valuation can likely help predominately new homeowners reach a desireable lower LVR % (Loan to Value Ratio) sooner.
A lower LVR means more choices with interest rates. Lower interest rates are typically exclusive to owner-occupier P&I loans that are less than or equal to 60% of the property value (LVR). This is one of the ‘side benefits’ of paying off your mortgage sooner.
If you have a mortgage broker, speak to them first about assessing your home and mortgage. They’ll be in the best place to support you and potentially negotiate a better rate on your existing loan.
If a better rate cannot be found with your existing bank, your mortgage broker might suggest refinancing to another bank or type of loan.
3. Stick to your plan
Research shows that people who have a long-term financial plan and access to financial advice are overall happier, healthier and wealthier.
If you have a plan, stick to the plan. If you don’t have a plan, now is the time to create one.
Having a financial plan gives you focus and builds resilience. The whole purpose of a plan is to guide us through change, both economic and in our own personal lives. Whether it’s a change in relationship, location or occupation, the one thing we can plan for is that change will happen!
At Waymaker, we encourage Australian’s to have a long-term financial plan that encompasses all aspects of wealth building — reducing debt, creating financial assets, securing income, and more.
Take action:
Buying a family home and want expert support? Speak to a Waymaker Mortgage Broker.
Saving for a home deposit? Our Financial Advocacy program can help you.
By Lachlan Nicolson
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This article contains general information and financial assumptions only.
This is not financial advice.
Header image by Nathan Dumlao.
