Rising Interest Rates

Rising Interest Rates

So, interest rates have risen dramatically. What does it mean for you?

With rising interest rates, it is important that you understand why it seems that the reserve bank is out to punish the mortgage holder. One-third of Australian families owe on their family home so it is easy to target to create change. Quite simply the reserve bank is wanting you to spend less. By spending less they are assuming that less activity will lower demand reducing costs as retailers and service providers are oversupplied and thereby stop rising their prices or at best start to lower them.

So, what should you do?

If you haven’t already you should be doing exactly what the Reserve wants you to do…start to reduce your spending. You need to. The wave of mortgage repayment increases is having an effect on Australian families everywhere. My worry here is if families don’t start to reduce spending, then the wipe out of household cash flow will show itself when school fees roll in or the electricity bill is due and there are no savings available to pay for them.

Get on the front foot.

So, let’s talk about some numbers. If your mortgage repayments have risen by say $500 per month then relook at your budget to see where you can get back get that $500 or close to it. It might have to come from your holiday savings, from your eating-out budget, or perhaps even look more deeply.

Here are 3 easy things to do.

  1. Do a budget. Boring I know but so important. A budget is about discovering your numbers. If you don’t have a tool, request our Easy Budget tool.
  2. Drill down on key areas where you can save. Insurances – compare. Insurance companies rise premiums and often discount on request. Groceries – don’t buy the junk, shop at cheaper retailers. Day to Day spending - perhaps it’s time to go back to packing sandwiches instead purchasing your California sushi roll. Dollars turn into hundreds, hundreds into thousands fairly quickly.
  3. Request a rate reduction. Where we can we will request a discount with your current lender or at best get you back to a competitive rate. If this is not possible and where it is in your best interest, we can consider refinancing. Send me an email, if you haven’t already, or book a time so we can have a chat.

So, remember, the time to act is now, cut back where you can, and request your current lender to sharpen their rate.