If spending thousands of dollars in interest charges will hurt your finances this year, Sandy Bhalla shares the secret to beating the banks from rising rates.
March 8, 2010
Like both sides of a coin, low unemployment levels and rising home prices are indicative of an economy making a comeback from the GFC but on the flip side Australian households are being hit hard with constant interest rates hikes.
According to a new report by RateCity, the expected interest rate rises of 1 percent this year is estimated to cost households an overall $3.34 billion.
The average household with a variable rate home loan, two average credit card debts, an average car loan and two savings accounts – all with average market rates – is likely to fork out an extra $1,225.30 in interest charges this year. And households without a mortgage would be expected to face an extra $103.30 in costs, mainly from higher interest on car loans and credit cards according to RateCity.
RateCity’s CEO Damian Smith, says it’s easy to dodge the extra costs. “Our research calculated the average rates for different financial products that average households would have, however there are much better deals out there that can save you a lot more than $1,255.30.
“If you have any debt, now is the time to start shopping around for the best deals and reduce your debt as much as possible so when rates rise, it won’t have as big an impact.”
So how can you minimize the pressure and curb the growing hole in your pocket?
Smith shares his tips:
- If you have any debt, now is the time to start shopping around for the best deals and reduce your debt as much as possible so when rates rise, it won’t have as big an impact.
- Households with an average variable home loan rate could save over $300 a month or $3,650 per year in interest (not including break costs and other fees), if you were on the average rates and switched to cheaper deals today.
- By paying an extra $200 per month towards a $300,000 home loan with a long-term average interest rate of 7 percent, you could save about $76,000 and reduce the 25-year term by more about five years
Like all things in life, the chances are that, what worked 12 months ago may not work so well now. Taking advantage of the situation by refinancing or switching products and comparing deals online will ensure you keep your hard earned dollars in your investments, and not in the banks pocket.