Why are interest rates rising?
A resilient Australian economy combined with a strong labour market and higher than expected levels of inflation1 has prompted the RBA to move decisively and raise cash rates from historic lows.
The RBA will be monitoring key indicators such as household spending, inflation, the labour market and the global economy closely to see whether the rate rises are having the desired impact in slowing the rate of inflation.
How will higher interest rates affect me?
Rising interest rates can mean that your minimum monthly loan repayments will rise if you’re on a variable rate. If you’re currently on a fixed rate, when your fixed term ends, the variable rate you go to may also be higher than you anticipated.
What steps can I take to manage rising interest rates?
At Community First, we’ve recently rolled out new variable home loan pricing to bring members some excellent value options when it comes to their home loan. Here’s some other ways you can keep your home loan on track and navigate your way through home loan increases.
Put offset accounts to work
Offset accounts are a great way of making your money work for you. A 100% offset account is an account linked to your home loan where you can park your savings and spare cash to reduce the interest you pay. Then, when interest is calculated on your home loan, the balance in your offset account is deducted from the loan amount owing, and interest is only charged on what remains.
Pay extra where you can
We know that paying extra off your mortgage isn’t always possible, but any extra you can spare can add up in the long run. For example, why not round up your mortgage payment to the nearest $50 or $100 to start small, knowing you’ll build up a small emergency buffer over time.
Don’t over commit
When interest rates were at an all-time low, people found other ways to spend spare cash. From home renovations, subscriptions, to a new car or toy. If you do start feeling tight
on cash, these discretionary expenses may need to be the first items for you to re-think if you need to find some room in your budget.
Focus on budgeting and planning
With industry experts predicting more rate hikes to come, now is a good time to look at budgeting and planning for your financial future. We have a range of helpful tools and calculators online to help you develop a roadmap for your financial wellbeing.
Don’t have a home loan? Harness rising rates with savings accounts
While rising interest rates are not great news for borrowers with home loans, for those with savings, they are a welcome sign. Rising interest rates can mean a greater return on your savings and investments.
Click here to check out what savings options could be right for you.