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HOW TO PREPARE FOR AN INTEREST RATE RISE

July 18, 2022
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You can navigate through interest rate rises with the right planning

There are a number of things to keep in mind when, and as, interest rates rise.

The most important of all is to not panic! You need to be mindful that any serious decision or step you take with your financial position could make you worse off if you are not careful.

There is no point doing anything rash. Taking your time to look at all the options available to you will help you make a more informed decision.

Be wary of what you read and are told too. By canvassing different opinions and not falling for the first piece of financial advice will give you a more rounded understanding. Remember that with preparing for and navigating your way through interest rate rises, there is no ‘one size fits all’ solution.

Speak with a trusted financial advisor who can help you find the best option for your particular circumstances.

Preparing for the worst may be best option

When it comes to how an interest rate rise will affect you, there is no point being anything but completely honest about where you stand.

If you are not clear of what your true financial position is today, then you are in danger of making things worse down the track.

There are a number of ways to help yourself by preparing your financial outlook from now.

  • Check your current home loan and how a rate rise will affect you
  • Investigate whether refinancing your loan will be beneficial
  • Review your household budget (and be thorough with all expenses)
  • Pay off your debts now
  • Increase your home loan payments if possible

If you can take the time to check how much a rate rise is going to affect you now, then you can minimise the damage and distress of when it happens in the future.

By looking at the worst case scenario, you will often see where you can make changes that will help offset the added pressures of an interest rate hike.

Getting professional help

It pays to get professional guidance on your financial status and what can be done with your home loan. Being proactive will help you make more of each opportunity.

Enlisting the help of a mortgage broker can be a valuable step.

They will be able to ask you in-depth questions that could provoke you to start thinking outside the box. Trying to tackle your financial position and commitments alone can be detrimental.

When you are looking at ways and where you can cut your expenses, a broker may unearth costs (even small but significant ones) that you may not have taken into account.

By analysing where and what your financial outlays are, there is a better chance of getting the full picture of where you stand financially before there is another rate rise.

One possibility is to refinance your loan.

How to find a lower interest rate

It can be easy to fall into the trap that your current home loan is the best possible option for you.

This could be because you had a good deal when you first took out the loan or you don’t want the hassle (and possible added costs) of switching to a different lender.

A trusted mortgage broker will be able to investigate the different ways you could save money and with which lenders. It is their role to find a better home loan option for you and they will provide choices based on what you want and your individual circumstances.

The other key thing to note is that a mortgage broker can often find you a better and even heavily discounted rate because of their close relationship with banks and lenders.

For example, a cashback entitlement of $3,000 to switch to a new lender might in fact be $4,000 by going through a broker. That simple $1,000 difference can be put towards your loan to offset an interest rate rise.

With even a small percentage difference in a loan rate, you could be saving a large amount of money and shortening the life of a loan. Speaking to a mortgage broker doesn’t mean you are locked into their thinking of the best property finance. You can shop around to find the most suitable broker for you.

Selling a property before a rate rise

Many people with a second or third property take the chance to sell one to offset the rate rise on the other properties.

To make the most of that asset, you can take a few special steps to adding value to the property.

By updating and doing some maintenance work on a home or commercial property, you give yourself every chance of getting a better selling price.

These changes don’t have to be drastic. There is no need to suddenly start looking at crane hire companies to bring in a new roof or make major structural changes.

Most of the time, it is cleaning up the façade of a place and concentrating on the inside that matters.

This is when the value of interior designers sydney can make all the difference. It is the same for the interior design style of a property. Showcasing what is possible within the space can open the buyer’s eye to the potential of the property and encourage them to up their offer.

If you have used a company for their property management services, they may be able to help guide you through the steps in how to present your property in the best light.

It is more than adding a new rug or sprucing up the place with a timber floor cleaner. Having a professional team design and decorate your home or commercial property can often be the difference between a completed sale and a number of offers, or a series of failed viewings.

Act now to make a change

As with any change that comes in life, it is more often those who are best prepared who get the best result.

That is even more crucial when it comes to the changes in your financial position through an interest rate rise.

Doing all you can now to work through any financial issues, amend your spending, pay down debts and look for the best possible rate for you, is vital. There are substantial differences between letting things impact your financial position and actively changing your position to be able to deal with any impact.

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