How rising interest rates affect your mortgage

How will rising interest rates affect your mortgage?

If you are a mortgage holder in Australia, then you have already felt the impact of 3 consecutive rate rises that the RBA has made. But what is that all about? What does it mean for you? And what can you do to keep yourself above water?

In an effort to slow the rising inflation this country is experiencing, and to lower the cost of living. We have had 3 consecutive rate rises issued by the RBA. May was our first rise of 0.25%, increasing the official cash rate from 0.10% to 0.35%. June saw a rise of 0.50%, taking the rate up to 0.85% and now July has seen a further 0.50% increase, bringing the official cash rate to 1.35% as of today. Predictions are for more to come, with the cash rate set to potentially peak at 2.5% sometime next year.

What has inflation got to do with it, you ask? Well, our cost of living is increasing. Haven’t you noticed your power bills going up? What about your weekly or fortnightly food shop? Every aisle has products priced higher and higher every time you walk down them. Petrol is also very expensive and due to increase when the government withdraws its fuel excise in a couple of months. With product availability still being affected by covid, prices have gone up for those products we can still get our hands on. Just about every industry has been affected, from building and construction to the wedding industry. The war in Ukraine is having an alarming impact on food shortages around the world and economic frustrations resulting from sanctions on Russia as well.

So what does this all mean for you with your interest rate increasing? Well, if you have a mortgage with $500,000 owing over a 30-year period and you were paying 2.5% in April, your monthly repayments were looking like $1,976 per month. Now, with the extra 1.25% increase, your monthly repayments will be $2,316 per month. In the space of 3 months, you are now paying an extra $343 per month.

With more rate increases predicted, if you haven’t already looked at your budget, now is the time to do it. Click on this link to download our family budget spreadsheet. Include all of your income and expenses to see how you are tracking and where you might be able to make some cutbacks. The next thing to do is have a look at your mortgage a bit closer. What interest rate are you paying? Is it still competitive? Does it offer the features that are important to you? Now might just be the right time to give us a call and look at a possible refinance. If you have any other debts, then a debt consolidation would be a great way of cutting down on your monthly repayments as a whole.

This has been our first rate increases in a number of years. Many of you have saved your pennies while we were in lockdown the last couple of years and can put these savings to good use now.

But if that is not you, please reach out and we can take a look at your current position and see what other options are out there for you, including reviewing your current rate or finding a better deal by refinancing.Reach out today to your local gold coast mortgage broker for a coffee and a chat!

hfinance is a mortgage broker company, with offices in Sydney and Gold Coast, Australia. If you would like to know more about refinancing or you have any questions about your financing requirements, contact us on info@hfinance.com.au or 1300 928 227.