5 Ways to Respond to Rising Interest Rates

As you are aware, interest rates are going up. The Reserve Bank of Australia increased interest rates for the seventh consecutive month on November 1, 2022, increasing the cash rate by 25 basis points to 2.85 percent, the highest level in nine years. Home loan and business rate increases will follow.
 
So, what should you do in response? Here are five suggestions:
  • Don’t panic. In order for your lender to approve your mortgage, it had to be confident that you could handle several rate increases. Consequently, if your financial situation hasn’t worsened since then, you should be able to handle increased repayments.

 

  • Get ahead of any problems. Contact me or your lender right away to discuss your options if you believe you might find it difficult to continue paying your payments. The more notice you provide your lender, the more likely they are to be flexible, therefore it is crucial that you get in touch before you miss a payment rather than after.
 
  • Budget for rate rises. Assume a 2% increase in your mortgage rate. Calculate your new monthly payment and begin making it right away. The surplus cash can be placed in an offset account, a redraw facility, or a designated savings account.
 
  • Business Owners seek advice – Consult with me and your accountant for guidance on how to best position your company to handle upcoming challenges with cash flow. You manage a prosperous company; let’s keep it that way.
 
  • Switch to a better loan. Since the home loan industry is so fiercely competitive, lenders frequently charge new borrowers lower interest rates than devoted clients. Therefore, you could save a lot of money by refinancing to a lender who offers a similar loan at a lower rate.