A lot of people are disappointed that the official cash interest rate rose by 25 basis points earlier this month. It was somewhat expected, but that’s no consolation to those feeling the pinch as their banks increase their mortgage interest rates by the same 0.25 percent margin.
Unfortunately, we expect that rates could rise another three times by the end of this year, potentially adding 0.75 percent or more to the interest rate of your mortgage.
Interest rate increases, however, aren’t necessarily a bad thing. An increase of interest rates can be a sign of a healthy economy, which is much more reassuring than being in the midst of a Global Financial Crisis.
Historically speaking, interest rates are still at very low levels, and future increases are a sign that the Australian economy is growing and that unemployment levels remain low.
For most of us, it is better that we have slightly higher interest rates and earn money from jobs to pay off the mortgage if the alternative of lower interest rates and a slower economy means that we will be out of work and without a home.
The economy may be heading in the right direction, but what if this means that you’re suffering from mortgage pain and struggling to make your repayments? Here are a few ideas that may provide some relief:
1. Contact a mortgage broker. They are experts with a bundle of knowledge who can create strategies to help neutralise or even relieve the pressure by finding a loan to suit your circumstances – either with a different lender or a re-configured loan.
Our Mortgage Explorer™ software compares your needs and preferences with loan features, interest rates and key fees and charges. It’s constantly updated with the latest loans from our panel of 16 lenders, including the big four banks.
2. If you are really over your head, an option may be to move out and rent a property until your position improves. In many areas of Australia, rents are growing faster than mortgages so you may have to move home to your parents or joining friends in a rental property yourself in order to get ahead.
3. Do you really need to stop by your café for the morning espresso drip or dash to the sushi bar because it looks nice? Be conscious of your everyday spending. Simple moves like this will have a positive long term effect on your mortgage.
These are just a few ideas that you could use to stay afloat while paying off your home loan. What will you do to manage your budget in the face of rising repayments?