If you’re a home loan holder with a variable rate home loan, then it’s highly likely that you’ve been enjoying lower interest rates. But, you may also be wondering when these historically low interest rates will begin to rise.
Most economists are currently saying that interest rates are likely to go up in the next 12-months. While most home loan holders are saying that an interest rate rise of 1 to 2 percent is manageable, is this really the case?
The average Australian mortgage currently hovers around $300,000 and costs the mortgage holder, who has a 5.25 percent interest rate with a 25-year term, $1,797.74 a month. However, if interest rates were to rise by 2 percent, then this would push monthly repayments up to $2,168.42 a month. A rise of $370.68 per month. For many home loan holders who are trying to manage other financial costs on a restricted budget, finding this extra money per month could be a struggle. Plus, it may mean that they or their family have to do without in other areas.
So how can you beat the rate rise and ensure that you can afford your monthly home loan repayments?
If you think you won’t be able to afford to pay more for your home loan than you are now, then consider fixing your home loan rate. There are some excellent 2,3 and 5-year rates on the market at present and fixing ensures your rate won’t change over this time.
But, before you fix your home loan, it’s important that you also consider the costs. Take note of break costs and other fees and only switch to a fixed rate if you are staying in your home long-term.
Compare your existing home loan to others on the market. Look at fees and charges and weigh-up if you can save by switching your home loan for another product on the market. For a home loan switch to be viable you need to be looking for a home loan that offers you a rate of 1 to 2 percent less than you are currently paying. This will then mean that when rates rise you’ll be paying less.
If you have residual income then consider paying this off your home loan. Making extra home loan payments will reduce your home loan principal, which means when rates rise you’ll pay less.
Are you looking to beat the rate rise? Contact eChoice today find the right home loan for YOU.