How to Manage Climbing Interest Rates

I am sure we have all noticed a jump in interest rates lately, with some rates going up dramatically over the past few months. With the Reserve Bank indicating that they are not done yet with raising the Official Cash Rate, we can expect to see rates continue to climb through 2022 and well into 2023.

While it is impossible to predict where they might end up, it is a good idea to start to plan for the inevitable – higher mortgage repayments. With many fixed terms coming up for renewal in 2022, there will be many homeowners who may start to feel the pinch. Here are our tips for managing this change.

CALCULATE YOUR NEW POTENTIAL RATES

It is a clever idea to take some time to work out how much your repayments could be if they were a couple of percent more. This gives you time to plan for how much the additional repayments could be, and how you are going to manage this. We recommend working it out at 1-2% more than your current rate, and even planning for a 3% raise for the future. This means that when the time comes, you are feeling a lot more prepared and can manage your higher repayments.

DECREASE YOUR UNNECESSARY SPENDING

It’s a good idea to take a quick look over your spending and remove anything that’s unnecessary. Think unused subscriptions or high levels of spending on things such as clothing or takeaways. Not only will this free up a little cash now that can be put towards reducing your mortgage, but it will also make it much easier to meet those higher repayments in the future.

REFIX YOUR LOAN

Whether we recommend refixing you loan, comes down to individual circumstance, but refixing now can potentially save you money overall. There are several factors which influence this, and we need to consider things like the length of the fixed term, any break fees that may be incurred, and your personal circumstances.

The good news is, that while rates will continue to climb, they are doing so gradually. We are not expecting any massive jumps in interest rates, and this gives borrowers the gift of time to plan for how they will manage this. If you need advice around what is best for you, then please contact Jonty on 027 619 4106