INTEREST RATES UPDATE: RBA HIKES CASH RATE TO 1.85%
The Reserve Bank of Australia (RBA) has hiked the official rate by another 50 basis points to 1.85%. Here’s how to survive and keep track of all these monthly rate adjustments.
Another RBA rate hike this month – that’s four months in a row!
It’s quite unbelievable how far interest rates have increased over the past four months. The cash rate was just 0.10% at the start of May and as of today, it’s 1.85%.
The Reserve Bank of Australia (RBA) Governor Philip Lowe stated in a statement that today’s increase is another stage in the normalisation of monetary conditions in Australia.
“The increase in interest rates over recent months has been required to bring inflation back to target and to create a more sustainable balance of demand and supply in the Australian economy,” said Governor Lowe.
“The (RBA) board expects to take further steps in the process of normalising monetary conditions over the months ahead, but it is not on a pre-set path.”
If you’re having a hard time hanging in there, here’s a quick rundown to assist you ease the strain on your household budget:
1. Set aside a buffer budget
It’s quite undeniable that interest rates will continue to rise in the months ahead. That implies it is critical to begin planning ahead of time, if at all possible, by setting aside a buffer budget.
Putting extra money into an offset account, redraw facility, or savings account – usually, a service that’s linked to your mortgage or is simple to access – is a typical way to do it.
2. Cut your expenses
How much do you actually spend on these subscriptions each month? Stan, Netflix, Spotify, Amazon, Audible, Apple TV, Disney, Paramount+, Kayo, Binge… and how many can you eliminate?
Takeaway coffees will be next on the list. How much do you actually spend every week for this? If you do takeaways daily for 6 days a week, you are probably spending around $120 per week, $480 a month. Alternatively, if you want to save, you may opt to make your own barista-quality coffee at home for between $30 and $70 per month.
This strategy is also wise for takeaway meals and will definitely help you cut back a huge amount.
3. Shop around
You must try to look for the most suitable item or service for the lowest price possible.
Aldi was found to be the cheapest grocery store in a recent Choice study. If that’s not an option for you, the average Australian family saves $114 each month by doing their food shopping online, according to an ING survey.
Also look for discounts or cheaper deals for your home insurance, utilities, phone and internet bills, car insurance, and even your pet insurance (sorry Rex!), if any.
4. Refinance your home loan
If you haven’t refinanced recently, there’s a good chance you can get a better mortgage rate. And you might want to get things moving sooner rather than later.
That’s because lenders must assess your ability to meet your mortgage repayments at a rate that’s at least 3% higher than the loan product rate you were offered.
As interest rates rise, the bar you’ll need to clear to pass that test (also known as home loan serviceability) will also go up.
Refinancing your mortgage can also extend the term, which might assist you to reduce your monthly payments.
Another alternative to think about is consolidating your debts, such as a car or personal loan into your mortgage to decrease your monthly costs.
If you need immediate cash flow, these may be a viable option for getting you out of a bind.
5. Get in touch with us!
Last but not least, don’t hesitate to contact us if you have any questions regarding interest rates, inflation, or how you’ll make your mortgage repayments.
Everyone’s situation is unique and we recognize that some of the ideas we’ve outlined above may not be suited for your financial or personal circumstances.
That is why if you’re worried about how you’ll meet your repayments in the months ahead, it is best to talk with an experienced mortgage broker like the team here in Will Bell Mortgage Broker. We’d be delighted to sit down with you and assist you in working out a plan moving forward!
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