RateCity
Prepare For A Rate Rise
If and when the Reserve Bank of Australia (RBA) announces that the official cash rate will increase, there are a number of strategies that borrowers can implement to prepare for a rate rise.
When interest rates rise, the methods that home owners can implement will not only help them take advantage of any low or stable rates, but also help them to prepare for a rate rise.
For instance, since May 2010, the RBA has kept the cash rate at 4.50 percent; however some experts predicted that it would increase before the end of the year.
In order to better prepare for a rate rise, borrowers can do the following with their mortgage:
- Accelerate repayments.
Obviously any rise in interest rates will mean higher repayments for those with
- Consider refinancing. It is extremely beneficial that every 12 months or so borrowers should do a health check on their mortgage. This process will ensure that you are not only getting the best rate available, but it allows you to save in repayments and keep you up-to-date with the mortgage market. Compare home loans online to see what other lenders are currently offering for their home loans and if you can find one that offers a lower rate than what you are currently paying. If so, perhaps you should consider refinancing. For instance, if you found that one of the top variable rate home loans on RateCity was at 6.46 percent but you currently pay 7.55 percent on a $300,000 mortgage, by switching you could potentially save around $209 per month or $62,700 after 25 years. Be sure to determine the fees involved for making the switch and work out if you refinancing is the best option for you. Check out the table below for a list of current variable rate home loans available.
- Compare fixed and variable home loans. If you think that rates might increase further in the future and the current interest rates are low, perhaps you should consider fixing your home loan. If you are not sure, you could either chose a variable rate loan or consider a split home loan where part is fixed and the rest is variable. The major benefit of split loans is that they can reduce the impact of rate movements because regardless of whether rates increase or decrease, only a portion of your loan will be affected rather than the whole lot.
