The seemingly never-ending and exponentially rising interest rates in Australia have proved a stressful time for homeowners. Throughout this difficult time in the housing market, there are a few things that you can do to soften the blow of increased interest rates on your bank account. 

Read on to discover our tips on how you can effectively manage your mortgage and finances to combat the negative effects of high-interest rates on your home loan. 

Budget and manage your finances effectively

In times of escalating interest rates in Australia, proper financial management becomes crucial in combating its effects. Effective budgeting isn’t just about balancing the books; it’s protection against the sting of rising rates. 

A well-crafted budget acts allows you to navigate through increasing interest rates by giving you a clear view of your income, expenses, and savings. 

Using tools like Moomoo’s Australian cash management account can help to more easily manage your savings and investments while tracking your spending with all your financial details in the same place. These budgeting tools enable you to brace for higher loan repayments while making sure that essential expenses are met and future savings remain intact.

Effective financial management involves not only crafting a realistic budget but also actively monitoring and adjusting it. With interest rates on the rise, this approach allows for proactive measures, whether it’s renegotiating loan terms, considering refinancing options, or seeking alternative investments that are more suited to higher interest rates. 

Compare rates

Amidst rises in interest rates, refinancing your mortgage stands out as one of the most practical and effective strategies. This process involves exchanging your existing home loan for a new one with a lower interest rate – offering the promise of reduced monthly payments and potential long-term savings. 

Additionally, refinancing allows for the extraction of equity from your home loan, establishing a financial safety net for unexpected expenses. However, it’s imperative to conduct a thorough assessment before pursuing refinancing, considering associated costs such as closing fees and appraisals. In this context, the significance of comparing interest rates is key.

Hiring the services of a professional mortgage broker is also a good idea if you are looking into refinancing your home loan. Mortgage brokers are generally experts in their field who can provide you with a comprehensive analysis of multiple lending institutions and pick out the loan that best suits your financial situation and goals.

By getting a professional to scrutinise and compare interest rates from different banks, you gain valuable insights into potential savings and benefits linked with refinancing that you may not have been able to identify on your own.

Pay more on your home loan now

Obviously, not everyone is in the financial position to do this – but if you can, Increasing your mortgage payments now can be a strategic move in combating the impact of surging interest rates.

Making additional payments toward your mortgage serves as a proactive step to manage the implications of climbing interest rates. By channeling extra funds into your mortgage, you diminish the principal balance which translates to savings on interest payments over time. 

Even modest increments in payments can yield substantial long-term benefits. A flexible approach to achieving this financial strategy is through a home loan offset account.

For homeowners with variable-rate home loans, the flexibility to make extra repayments presents a valuable opportunity. This practice not only expedites loan repayment but also creates a financial cushion. 

The upsurge in interest rates has prompted many borrowers to consider fixing their rates to secure against future hikes. However, the surge in fixed rates has made this option less enticing. 

Therefore, putting additional funds towards your existing mortgage is an appealing approach to navigate the effects of rising interest rates in the current financial landscape if you have the current funds to do so.

Understand when your fixed rate ends and what it will entail

While a fixed-rate loan offers stability throughout its agreed-upon term, the conclusion of this period signals a potentially drastic shift in your mortgage payments.

Once the fixed-rate tenure ends, your interest rate and subsequent repayments could experience a significant surge, particularly in the environment of ever-rising interest rates. 

Failing to take action on the expiration of your current term often results in your loan reverting to your lender’s standard variable rate. Consequently, being cognisant of the whats and whens of this transition is crucial as it provides an opportunity to reassess and prepare for the possible financial adjustments ahead or refinance before it’s too late.