How much will your repayments actually go up with interest rate rises?

Since the dawn of time….. Well the dawn of commercial TV and news media, they have always loved to hype the topic of interest rates. They don’t emphasise the actual facts around interest rates rising. In my opinion, the market is simply resetting to get “back to normal” levels. Here’s a few points to help you understand exactly how the future interest rate rises will affect you.

What are “normal” interest rates?

Interest rates dropping to historical lows of below two percent was always going to be short lived. For rates to remain at these levels would have brought pandemonium to the house prices that are already insanely inflated.

The average interest rate for the last 20 years is 3.89% and its very likely to get back to those levels in the future. So be prepared for this when you are crunching your numbers.

What does this mean for you?

When assessing your financial situation, don’t get sucked into the media hype. They choose the most extreme scenarios in most cases to show you how bad this is going to be.

Let’s run an example. If you were paying 2.5% on your home loan now, and assume it increased by a further 2%.

Based on a $650,000 mortgage over 30yrs, your repayment will increase by $725 per month. That may seem a lot. But this would be a very gradual climb to get to this point, and you can make smaller lifestyle adjustments to combat this.

Let’s break it down further. This works out to be $25 per day.

How to recover a whopping 2% interest rate hike:

  • Become more economical with your shopping, go to the market and get your meat and produce, they are far cheaper than woollies.
  • Delete one or two of the 13 streaming applications you have
  • Buy a coffee every second day, make one at home every other day
  • Invite friends over to your house and cook an awesome meal for them instead of spending a few hundred out at dinner

All of these little things will create changes that counteract any rate rises and you may endure.

Working your bank for a better rate

There has also been a silver lining since the rate went up. We have seen countless wins recently with clients who rate breached using Rate Tracker. We have been able to get on the front foot with their bank and in most cases we could get a 0.25% discount which would mean their rate never changed.

Rate rises aren’t great, but we’re trying to work out the positive changes you can make to counteract the change in your monthly budget. It will affect most Australians, but tackling this head on not rolling over and accepting the rate rises give you an opportunity to win a little bit back in these uncertain times.

The bigger killer in play here is the cost of living, make sure you are constantly reviewing your outgoings, they are increasing faster than we know. We’ll keep doing everything we can to help out along the way. We’re in the exact same boat as you and trying our best to stay ahead.

We’ve helped 400 clients save $2,444,527 in interest by refinancing their loans with Rate Tracker

If you’re interested in learning how we can help you, click here.

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