Why are interest rates rising?
A resilient Australian economy combinedwith a strong labour market and higher thanexpected levels of inflation1 has promptedthe RBA to move decisively and raise cashrates from historic lows.
The RBA will be monitoring key indicatorssuch as household spending, inflation, thelabour market and the global economy closelyto see whether the rate rises are having thedesired impact in slowing the rate of inflation.
How will higher interest rates affect me?
Rising interest rates can mean that yourminimum monthly loan repayments will riseif you’re on a variable rate. If you’re currentlyon a fixed rate, when your fixed term ends,the variable rate you go to may also be higherthan you anticipated.
What steps can I take to managerising interest rates?
At Community First, we’ve recently rolledout new variable home loan pricing to bringmembers some excellent value options whenit comes to their home loan. Here’s someother ways you can keep your home loan ontrack and navigate your way through homeloan increases.
Put offset accounts to work
Offset accounts are a great way of makingyour money work for you. A 100% offsetaccount is an account linked to your homeloan where you can park your savings and spare cash to reduce the interest you pay.Then, when interest is calculated on yourhome loan, the balance in your offset accountis deducted from the loan amount owing, andinterest is only charged on what remains. Pay extra where you can
We know that paying extra off your mortgageisn’t always possible, but any extra youcan spare can add up in the long run. Forexample, why not round up your mortgagepayment to the nearest $50 or $100 to startsmall, knowing you’ll build up a small emergencybuffer over time.
Don’t over commit
When interest rates were at an all-time low,people found other ways to spend sparecash. From home renovations, subscriptions,to a new car or toy. If you do start feeling tight
on cash, these discretionary expenses mayneed to be the first items for you to re-think ifyou need to find some room in your budget.
Focus on budgeting and planning
With industry experts predicting more ratehikes to come, now is a good time to lookat budgeting and planning for your financialfuture. We have a range of helpful tools andcalculators online to help you develop aroadmap for your financial wellbeing.
Don’t have a home loan? Harnessrising rates with savings accounts
While rising interest rates are not great newsfor borrowers with home loans, for those withsavings, they are a welcome sign.Rising interest rates can mean a greaterreturn on your savings and investments.
Click here to check out whatsavings options could be right for you.
1 https://www.rba.gov.au/media-releases/
2022/mr-22-14.html
