Home Mortgage Rates

Home Mortgage Rates

The last ten months have been brutal for mortgage holders. After saying rates would ‘not rise until 2024’ The Reserve Bank have increased the cash rate, which directly impacts home mortgage rates, an unprecedented ten months in a row.[i] So in less than 12 months rates have gone from 0.1% to 3.6%.[ii] The highest rate in more than 10 years.

When the median dwelling (house or apartment) price in Sydney is $1.27 million, this kind of increase can make an enormous difference to your monthly budget.

How Are We Coping?

A November 2022 study by the Australian National University found that a whopping 25.1% of Australians reported finding it difficult to manage on their current income.[iii] Unsurprisingly, in the lowest income bracket, this rose to 50%. And since we have had an additional four home mortgage rate rises since this study, the numbers can only be going up.

What Can You Do?

Whilst there is nothing you can do about ongoing rate rises, there are a few things you can do that may at least help alleviate the pressure on your financial situation.

Budget

Break out the budgeting spreadsheets. When you really drill down into your spending patterns you maybe surprised by what you find. There are undoubtedly areas where you can save a little. If you struggle with how to structure a budget that works for you and your family, your financial advisor can give you advice, and recommend some good and inexpensive budgeting software to help you.

Refinance

Take a good look at the marketplace. If your home mortgage rate is not competitive, don’t be afraid to ask your bank for a better deal. And if they won’t come to the party, go elsewhere. If you have a mortgage with lots of bells and whistles, which tends to add to the cost, think about parring it back to a basic mortgage with a lower rate. But always retain an offset account, because having even a small amount in this account will reduce the amount of interest you pay.

If you are refinancing, it may be worth extending the term of your loan so your repayments are reduced. You can always increase them and pay off early once this home mortgage rate and inflation crisis subsides.

Consolidate

If you have credit card debt and personal loans, consider rolling them into your mortgage. The interest rate on personal debt is much higher than on a mortgage, so you will save interest by moving them. If you do this, try to keep your credit card use to a level you can afford to pay off every month so you don’t find yourself in this position again.

Asset Assessment

Take a good look at your assets. Do you have a boat or a caravan you rarely use? A holiday house that sits empty most of the time? A car that rarely gets driven? If the answer is yes, think about selling them. Then put the proceeds straight onto your mortgage. The less you owe, the less interest you will pay. Simple.

Downsize

If you are really struggling, don’t wait around hoping things might get better. The property market is likely to continue dropping. Selling and moving to a smaller house, or one a little further from the city, sooner rather than later, may be a good idea. Again, a good financial advisor can give you guidance based on your personal circumstances.

If you are feeling the pressure of inflation and the increase in home mortgage rates on your financial situation, Manly Financial Services can help you with practical advice and tools to help get you through these difficult times. Give us a call on (02) 9976 3388 or contact us via the below link.

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References:
[i] The Board don’t meet in January, hence their was no rise that month
[ii] https://www.rba.gov.au/statistics/cash-rate/
[iii] https://csrm.cass.anu.edu.au/research/publications/economic-and-other-wellbeing-australia-october-2022