RATES RISE AGAIN – Now Is The Time To get Your Mortgage In Order.

Having held off raising interest rates in February, the RBA has, as expected, pushed up the official cash rate by 0.25%.

So far 3 out of 4 major banks have mirrored the Reserve Bank with a 0.25% increase to their standard variable rate. CBA now has a standard variable rate of 6.86%, ANZ 6.91%, and Westpac 7.01%. NAB has yet to confirm an increase.

RBA governor Glenn Stevens said that?the global economy?was growing, and world GDP?was expected to rise at close to trend pace in 2010 and 2011 and in?Australia economic conditions in 2009 were stronger than expected, after a mild downturn a year ago.?
On the back of this Economists are predicting a return to a more neutral interest rate, indicating further increases of between 0.5% and 1.0% over the next 12 months.

We can’t really be grumbling too much that rates are rising when we have just been through the lowest period of interest rates in our lives (for most people anyway). This is not to say that things won’t get harder or tougher – they will for a lot of people.
Looking into the Future
Instead of considering what the rates are today, let’s start thinking about your position when rates get to 7.5% or even 8%. Rates might take a year or more to reach that level but you should start planning now!

Try this quick exercise:

Work out your future repayments.

Enter your loan amount and an interest rate of at least 7.5%.   Go To Loan Calculator

Make the loan term equal the years remaining on your home loan (so if you have had your loan for five years, change the 30-year term to 25 years).

Is this Comfortable or Scary?

If it looks a bit scary though, it’s time to make some changes.

Know your money habits

You have to first identify your ‘bad’ money habits – the ones that can get you into trouble by overspending. Next, you have to start being strict with yourself on what you can and can’t do.Take action NOW!
Do not wait for rates to become so high you are really starting to stress out – pretend we are in the position now and make adjustments to your life. Your action now will start to safeguard you against the rate rises to come.

You need to be savvy with your money. Do you spend all of your income each month? Is it because it is just there or is it out of necessity? Most of us spend what we earn, no matter how much that is. We often see people with extremely high salaries and no savings – human nature does not seem to change much no matter your financial position. Contact us here for a link if you require one.

It might be time to for a lower interest or a better product to suit your lifestyle. Contact us here. We can help you find out if your current loan is the best for you going forward.