Are you on a variable rate home loan? If so, chances are your bank has tried to increase your interest rate at some point. Even if the Reserve Bank keep rates on hold, banks still have the ability to increase your rate whenever they choose. Normally the rate will only go up .25 – 0.5% each time, however that can mean that you need to pay hundreds of dollars more each month to make your minimum repayment.
So, what should you do when your bank puts up your rate? The first thing is not to panic. Even if your household budget is tight, a small interest rate rise shouldn’t be the end of the world. Although it will mean you are charged more interest over the life of the loan, it’s important to remember that interest rates move in cycles. We have just experienced record lows in interest rates – some of the lowest rates that have been seen for 20 years. This should be a time where homeowners are looking to pay off their mortgages as quickly as possible, to build up a base of repayments in case the time comes when rates go up 2, 3 or even 5%.
If you think you may no longer be getting the best deal on your mortgage, it’s time to speak to a Mortgage Broker here at Smartline Rockingham. We’ll sit down with you for a confidential chat and help you sort through your finances to find ways to reduce the burden of making repayments. One option might be to call your bank to see if a better deal is available. Alternatively, our specialists can search the market for a better deal, and help you switch banks and secure a lower interest rate or approach your existing bank to see if we can obtain a better rate for you.
We’ll also look at your loan structure to see what type of loan and loan repayments suit your personal circumstances. For some, a variable loan may introduce too much uncertainty to your budget. A fixed rate loan provides certainty of both your interest rate and minimum repayment amount. Shopping around for a good deal at least once per year is a wise thing to do.
Contact us today if you’d like to book an appointment with one of our Mortgage Brokers.