The RBA has raised the cash rate to 4.60%. See what homeowners can do now, from reviewing their rate and offset to comparing refinancing options.
The Reserve Bank of Australia has increased the cash rate again, taking it to 4.60%.
For mortgage holders, another rate rise may not be welcome news. But it does not mean your only option is to wait and see what happens next.
In fact, a changing interest rate environment can be a good reason to take a closer look at your home loan, your repayments and the way your lending is structured.
With inflation remaining elevated and the RBA leaving the door open to further increases, there is also a possibility that rates could move higher again at a future meeting.
So rather than trying to predict exactly where interest rates will go next, it may be more useful to focus on the parts of your mortgage you can control.
It sounds obvious, but many borrowers do not know their current home loan interest rate.
If you have had the same loan for several years, your lender may have changed its rates numerous times since you first took it out.
Start by checking:
Once you know where you stand, you can make a more informed comparison.
An RBA rate rise does not necessarily mean every home loan in the market will end up priced the same way.
Lenders set their own home loan rates and may compete differently for particular types of borrowers.
That means it can be worth comparing your existing loan against other options available to you.
A mortgage broker can look across their panel of lenders and help you understand whether there are alternatives worth considering, taking into account rates, fees, loan features, eligibility requirements and the costs involved in changing loans.
Importantly, a lower advertised rate does not automatically mean refinancing will put you in a better position. Application fees, discharge costs, valuations, package fees and the remaining term of your loan should all be considered.
Refinancing is not always necessary.
Sometimes the first step can simply be asking your current lender to review your rate.
Lenders regularly reassess pricing for existing customers, particularly when a borrower has a good repayment history, a lower loan-to-value ratio or competing offers available elsewhere.
There is no guarantee your lender will reduce your rate, but it can be worth asking the question.
Interest rate discussions tend to focus on the headline rate, but your loan structure can also affect how effectively you manage your mortgage.
Depending on your circumstances, this could include reviewing:
Different options have different costs, restrictions and risks, so the right structure will depend on your individual circumstances.
For borrowers with an offset account, higher rates can make the value of money held in offset more noticeable.
Money sitting in a 100% offset account generally reduces the portion of your linked home loan balance on which interest is calculated.
For example, if you had a $600,000 home loan and maintained $40,000 in a full offset account, interest would generally be calculated on $560,000 rather than the full $600,000 while that money remained in the account.
That does not mean an offset is automatically the right option for everyone. Some offset loans have higher rates or additional fees, so the overall cost of the loan still matters.
If your budget allows it, you might also consider preparing for the possibility of future repayment increases rather than waiting for them to arrive.
That could mean directing additional funds into an offset account, making extra repayments where your loan permits them, or simply reviewing household spending so there is more room in your monthly budget.
The objective is not to assume another rate rise will happen. It is to understand how another increase would affect you and whether you have room to absorb it.
Refinancing can sometimes reduce the interest rate or provide access to features better suited to your circumstances, but the headline rate is only part of the equation.
Before changing lenders, consider:
Extending the loan back to a new 30-year term may reduce required monthly repayments, for example, but could also increase the total amount of interest paid over time if the loan is kept for the full term.
A broker can model different scenarios so you can see the potential costs and repayments before deciding whether refinancing makes sense.
Higher interest rates affect more than existing mortgage repayments.
They can also influence how much someone may be able to borrow because lenders assess applications using interest-rate buffers and their own serviceability criteria.
If you received a borrowing estimate or pre-approval some time ago, it may be worth having it checked before making an offer on a property.
At the same time, changing market conditions can create different opportunities for buyers, so borrowing capacity is only one part of the picture.
If your mortgage repayments are putting significant pressure on your household budget, it is generally better to investigate your options before you begin missing repayments.
Possible steps could include reviewing the loan, speaking with your lender about available assistance, examining your budget or discussing your circumstances with a mortgage broker.
Your lender may also have financial hardship options available depending on your situation.
It can be tempting to put everything on hold until the RBA announces its next move.
But your mortgage does not need to stay on hold with it.
Rates may rise again. They may remain unchanged. Eventually, they may move in the other direction.
None of us can know the exact path in advance.
What you can do is understand your current position.
A home loan review can help you see your current rate, repayments, equity, loan structure and available alternatives in one place.
If you have not reviewed your mortgage recently, now could be a useful time to do it.
We can review your current home loan, look at the options available from our lender panel and explain how different rates and loan structures could affect your repayments.
There is no obligation to change lenders simply because you review your loan. Sometimes the outcome may be that your existing loan remains suitable.
The important thing is knowing where you stand.
Speak with a mortgage broker today and review your home loan before the next RBA decision.
