Will Interest Rate rises affect you?
The Australian cash rate has just hit 3.6% with a prediction of further increases before we see any relief. With 10 consecutive rate rises in as many months and more to come, it has placed significant pressure on homeowners & investors.
“The Board expects that further increases in interest rates will be needed over the months ahead to ensure that inflation returns to target and that this period of high inflation is only temporary.” Quote from the Reserve Bank 07/02/2023.
There will be one group of borrowers that will feel the impact of these interest rate rises more than most and that is the group that fixed their rate at around 2.2% for the past couple of years. Most of this group will be coming off their fixed rate in the near future and will be paying between 6-7%. When you calculate this into dollar value, this will add approximately $12,000 – $15,000 per annum to what they are currently paying based on a $500,000 mortgage. For some homeowners and investors this will be unsustainable.
So what can you do in this situation?
All lenders have a hardship policy to assist in the short term, see the link below or contact your lender directly. The best thing you can do is get in front of the situation and not become a statistic and be forced to sell.
https://moneysmart.gov.au/home-loans/problems-paying-your-mortgage
Refinancing is another option but you need to be careful here as your property may be worth less than when you purchased it. Refinancing can work for some, particularly if you have good equity or it may just be a band-aid solution for those with less than 20% equity as you will be required by the lender to purchase mortgage insurance which is another expense. Do your research before you make the switch.
If you discover that your repayments are not sustainable, selling your property may be another option. Be careful not to put yourself in a position of financial stress, as this can turn your life upside down pretty quickly. Sticking your head in the sand is not a good option so be proactive and face the situation head on.
Just remember, it’s not all doom and gloom out there as some would have you believe. The housing market in the Moreton Bay region is still strong and in demand albeit the market has softened slightly, which is to be expected after any boom.
If you would like an appraisal on your property so you can be ahead of the curve please feel free to contact our office as we are happy to help. If you would like an instant estimate on what your property may be worth click the link below for your FREE property report. Remember, this instant estimate is driven by an automatic algorithm so for an accurate appraisal please speak with one of our experienced agents.
