Check your tampons
When asked for his message to home borrowers this week, Lowe was clear in his advice: “Make sure you have tampons,” he said. “Interest rates will go up.”
Many families have built up large reserves of savings during the COVID-19 pandemic, due to lockdown restrictions on spending opportunities, generous government support and tax cuts.
Lowe says most households are paying off their mortgages faster than their lenders require and/or have accumulated large sums in mortgage offset accounts.
Indeed, anyone who did not ask their bank to cut their repayments when interest rates fell may find that they are ahead of their required payments because more of their money has gone to reduce the principal of his loan than to pay interest.
If you’re worried, it’s worth calling your bank to confirm how far away you are.
If you are already making repayments above the minimum, your lender may not have to increase your actual repayments for some time after interest rates rise.
Also, remember that your lender was required to “stress test” your ability to repay your new loans if interest rates rose 2.5 percentage points above the interest rate. in effect when you took out your loan. So, in theory, you should be fine for a while, unless you fall prey to “lifestyle inflation” and spend your spare money on other things.
Check your family budget
This is a great time to take a closer look at your household income and expenses, to see what kind of excess cash you have each month.
If your mortgage payments go up, you can do one of two things. First, you can simply accept that you will have smaller monthly budget surpluses. Second, you can start looking for ways to increase your income or reduce your expenses to maintain your savings rate.
If you don’t have a monthly surplus and are relying on your debt to get out of it, you can call the National Debt Helpline on 1800 007 007. This is a financial advice service free and confidential.
Look for ways to save
I think the biggest areas of fat in most household budgets are food expenses and insurance.
Now is a great time to review your insurance cover – including health, car, home and contents and personal – to make sure you’re not paying for higher level cover than you have. need. Also, start shopping around for cheaper deals.
When it comes to food, try keeping a diary of all your expenses for one month, then set an intention to spend less the next month. You’d be surprised how much you could save if you were just careful.
Get the best mortgage deal
Finally, there’s never a bad time to make sure you’re getting the most competitive home loan interest rate.
Google it MoneySmart Mortgage Calculator to see the last average interest rate paid on all new loans (including fixed and variable rates). This will give you an idea of whether your mortgage rate is too high. Then use comparison sites like Canstar, Compare the market, RateCity Where Searcher to find the best deals available. Switch to one of these or call your current lender to request a “rate review” because you intend to change.
It is true that fixed interest rates have soared from their lows of last year. But there are still a few “1 point something” percent deals like mine on the market. Much more in the lower “2s”.
However, you better act quickly. Fixed rates are increased daily, so your window of opportunity for a bargain is closing. Better move.
- The advice given in this article is of a general nature and is not intended to influence readers’ decisions regarding investments or financial products. They should always seek professional advice that takes their personal circumstances into account before making financial decisions.
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