So, interest rates are rising, and all we seem to be hearing about is the doom and gloom! We all need to breathe before panicking and look at the situation logically.
Yes, we’re seeing rates rise quickly, which is needed to counter the negative impacts of inflation. Sure, they’re going up a bit quicker than we all anticipated, but we need to be realistic that they were never going to stay at that level for long and were put in place to counter the impacts of the pandemic.
We are seeing a market correction, with rates returning to the levels they were at pre-COVID, and we expect them to get there by Christmas, with talks of rates going up a further 1.25% by then leaving us with a cash rate of 2.10%.
These rises are things going back to normal
As we mentioned above, this is a reset – and it has been on the cards for a while despite what the RBA might have been saying over the past few months. As much as they told everyone rates would not go up until 2024, the inflation figures were too high, and they simply needed to be brought forward.
It’s worth remembering that Australia has AAA-rated banks and that the RBA is not trying to sink the ship – increasing interest rates is a good strategy to slow inflation down.
We understand why you may be concerned, especially if you sought finance when rate rises were not on the cards or if you didn’t lock them in before the current increases; however, you must keep cool!
Speak with your broker now
The first thing you should do is contact MAW Money regarding your existing loans – as brokers, we have much more power when negotiating with banks on your behalf to keep your rates competitive during the subsequent few rate rises.
We’ll also look at your current lending arrangement and assist you in determining if it is the best possible solution available right now.
Hedge your bets!
There are plenty of options available to you about fixing and going variable, and if you want to take a more risk-averse option, look at splitting your loan to spread the risk. You can look to fix 50% of your mortgage and then go with a variable rate for the other 50% of it. Of course, how much you fix/go variable is dependent on your current situation; however, we can help you navigate the complexities of doing this and connect you with lending solutions that work.
Saving and minimising your debt
Now is the time to assess your current financial situation and relationship with money. The point of interest rate rises is to force consumers to be more mindful with their spending, especially with the current inflationary market environment created by COVID. Easy ways you can try and minimise expenditure is to cut back on eating out or cancelling some unnecessary subscriptions and then divert this into your mortgage and divert the extra costs.
It’s also a time to save – if you were diverting all the extra money you saved when rates were at a 100-year low, you’d be quite far ahead in your payments, giving yourself some needed wiggle room until the rate rising environment cools down. This still applies now – maintain a rainy-day fund, of course, but if you can, try diverting extra payments into your mortgage when you can.
Now is also the perfect time to look at consolidating personal debts into your home loan. While house prices in Brisbane remain strong, you can use some of your available equity to pay out any existing credit cards or personal loans to free up monthly cash flow. Again, this will allow you to divert this cash flow into your mortgage, offsetting the impact of rate rises.
Is it time to purchase another property?
The last two months of rate rising have had their desired impact – with the higher-than-expected rate rises from this month and the expected rises until Christmas, property prices have started to plateau – especially properties in the Sunshine and Gold Coasts.
We’re seeing more stock coming onto the market, with sellers trying to take advantage of the tail end of the boom, meaning you’ll have access to more property without the overheated competition you may have faced over the past few years.
This applies to both first home buyers and investors – now is the time to get a bargain. Banks are also still being very competitive and fighting for your business.
Take the hassle out of your lending experience and talk to MAW Money today – we’re here to get you the best possible loan tailored to your financial needs, and yes, we still have lenders offering rates with a 2 in them