The rise in the inflation rate to over 5% in the last quarter has brought forward the expectation that the Reserve Bank will raise the cash rate this month. Interest rate increases are commonly used during an inflationary period to reign in spending and reduce the inflationary pressures we are all experiencing. Usually the Reserve Bank will increase rates in 0.25% increments, however some experts are suggesting the rate will be increased by 0.40% to increase the current cash rate to 0.50%. For some homeowners this will see their loan repayments increase by over $100 per month , so what can you do to minimise the impact of these changes?
- REVIEW YOUR CURRENT HOME LOAN
As a mortgage broker I regularly come across people who have had a Home Loan with the same lender for five years or more. They have simply been paying the required repayment without ever thinking about what the current interest rate is, the fees that are being charged and what other lenders may be offering.
In the current environment it is a mistake to assume that your current Home Loan is providing you with the best value. By having your loan reviewed a Mortgage Broker may be able to present products from lenders offering lower interest rates than you are paying currently. This could potentially save you thousands on interest costs or help you pay your loan off sooner.
Another benefit of having a review is to ensure the type of loan you have remains the most suitable to meet your current needs. Offset, redraw, the ability to make extra repayments or switching your rate between fixed and variable rates are all options your Mortgage Broker can review for you.
- CONSOLIDATE MORE EXPENSIVE PERSONAL LOANS AND CREDIT CARDS
You may also have some smaller debts, such as credit cards or personal loans, that are charging higher interest rates but could be consolidated into your Home Loan. This could help repay these debts sooner by reducing the costs of these debts but would also simplify your finances, reducing the number of loans and repayments being made to multiple lenders.
- NEGOTIATE A BETTER DEAL WITH YOUR CURRENT LENDER
Even without refinancing your Home Loan to another lender, your Mortgage Broker may be able to negotiate a better deal with your current lender. It costs a lender a lot more to attract new borrowers than to keep their existing customers, which is why they invest a lot of money in business retention teams. By looking at what competitors are offering your Broker can use this information to leverage a lower rate with your existing lender.
It is also important to note that a mortgage broker is required to act in their client’s best interest by law, which is different to the requirement on a lender when you deal with them directly. That is why the best person to review your Home Loan is your local Mortgage Broker. At SHL Finance we are already proactively helping our clients negotiate a better rate with their current lender, reviewing their existing loans and discussing ways to potentially save our clients thousands of dollars. We would love the opportunity to help you too.
Please call Reece Droscher on 0478 021 757 should you want to discuss your options.