The Reserve Bank of Australia (RBA) has announced an increase to their cash rate. So, it’s a good idea to plan for a higher rate environment and think of ways you can lessen any impacts on your budget. To help you make the most of the situation, we’ve put together this guide that includes an overview of rate rises and ways you can prepare.
What are rate rises, and what do they mean for you?
The RBA sets cash rates to sustain inflation. These rates are increased to curb spending and lowered to stimulate spending. Currently, economists forecast that there could be multiple rate increases over the coming years beyond this initial rise, given the last increase was in 2010.
But what does this mean for you? Essentially, the interest on your loans is likely to go up. But there are ways you can plan for this and reduce the impact of rises on your goals and lifestyle. To start, you should visit our repayment calculator and run some numbers to see how an interest rate increase will change your loan and whether you need to adjust your budget.
Review your budget
Speaking of budgets, you should review what you have in place! And if you don’t have one, now is a good time to start.
Review your monthly surplus. Can you make higher repayments or cut out some costs? Running through these scenarios will help you stay on top of your finances.
Look into additional repayments
Making additional repayments is a great way to reduce your home loan if your budget allows. The more you reduce your principal, the less time it may take to pay off your home loan. To understand what additional repayments can do for you, check out our additional repayments calculator.
Look into a fixed loan
A fixed rate home loan gives you the comfort of knowing what your repayments will be over a specific period, making your goals and plans more manageable. One thing to be aware of is the end date of your fixed loan and any potential increase in interest based on the economic conditions at that time.
If you are looking to move to a fixed rate, you can do so with confidence by locking in an interest rate with a rate lock service. For example, our rate lock is applicable for up to 100 days from the request date, so that you can protect yourself from any potential rate increases.
Or try a split loan
Want the best of both worlds? Why not split your loan into a variable and fixed portion. You’ll get the security of a fixed rate for a part of your loan and all the benefits and flexibility of a variable rate for the other portion. Find out more with our split home loan calculator.
Make the most of flexible features
Offset accounts are a solid option if you’re looking for some flexibility. Every dollar you keep in your offset account reduces the interest you'll have to pay on your linked home loan. This has the benefit of allowing you to use your offset funds when you need them.
Remember, Virgin Money is here to help. You can speak to one of our friendly team members today or your broker to understand the options available to you.