April 12, 2011
With the rising cost of power, food, fuel, and an interest rate hike on the horizon, now might be a good time to fix your mortgage.
While prices of household electronic goods have come down, the cost of essential items has risen sharply.
JP Morgan”s recent cost of living index tracked price increases for items such as food, fuel, electricity, mortgage interest and consumer credit.
Electricity costs rose 12 per cent over the past calendar year, fresh food and vegetables almost 8 per cent and petrol prices jumped 5 per cent.
And the effects are being felt across the mortgage belt. Ratings agency Standard & Poor’’s said Australian mortgages that were more than 30 days in arrears jumped to 1.59 per cent in January, up from 1.38 per cent in December 2010.
With many already struggling to meet their mortgage repayments, there is also an interest rate rise looming.
While interest rates have enjoyed a period of stability at 4.75 percent for the last five months, the Reserve Bank of Australia has warned interest rates will rise over the next few months.
Fixing all or part of your mortgage could be a solution to mortgage stress. For example, a rise of just 0.5 percent on an average $500,000 mortgage can lead to around $150 month in extra repayments.
An alternative is to split the mortgage debt 50:50 into both fixed and variable.
It also pays to shop around.
“There is a big variation in lenders’ interest rates,” says Andrew Willink, the founder of financial products comparator Canstar Cannex, says. “The gap between the highest and the lowest is still very high.”
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