How will cash rate rises impact homeowners?
The recent rise in the cash rate will have a flow-on effect to variable mortgage rates, which will increase repayments for many Australians. Here at North Brisbane Home Loans – Brisbane Mortgage Broker – we know this could cause challenging periods ahead for mortgage holders, even financial stress for some households. In this blog post, we’ll explore how the cash rate rise may impact homeowners and what you can do to prepare for it.
What’s the impact on homeowners?
The first thing to understand is how your home loan works. If you have a variable mortgage rate, your interest payments will go up or down in line with the cash rate. This means that when the Reserve Bank of Australia (RBA) raises the cash rate, your home loan interest payments will also increase.
Lenders often pass on cash rate rises to variable loan holders by increasing their current variable interest rates. Even a small increase in your variable interest rate could have an impact on your repayments.
The Reserve Bank has said that it expects the cash rate to rise gradually over the next few years, which means that variable home mortgage rates are also expected to increase.
For some people, this may mean they are unable to meet their repayments and could end up defaulting on their home loan. If you’re concerned about how the cash rate rise will impact your repayments, it’s important to speak to a trusted mortgage broker Brisbane about your options.
How much more could you pay?
Exactly how much more you could pay each month when the cash rate rises, depends on the value of your loan, what’s owing and your loan structure (fixed versus variable).
As an example, say you purchased your property for $999,037 with a 20% deposit. Your monthly repayments might jump from $3,365 to $3,765 if the cash rate were to rise 1 per cent and your interest rate increased from 2.99% to 3.89%. That’s an increase in repayments of $400 a month.
Even a smaller monthly repayment increase may cause you financial stress to your household budget. Talking with an expert mortgage adviser can help you assess your options and determine the best possible course of action.
What do you do if you can’t make repayments?
If you want to know the best course of action regarding the cash rate rise, you can speak to an experienced mortgage broker. They can help you investigate loan restructuring or a repayment holiday, which can help make your repayments more manageable.
If you’re struggling to meet your repayments, it’s important to get help as soon as possible. There are a number of organisations that can offer free and confidential mortgage advice, including North Brisbane Home Loans (NBHL).
Other options we can help you consider include:
- Requesting a lower mortgage interest rate from your current lender (or a new one)
- Switching to interest-only payments
- Fixing your interest rate so you can budget for repayments
- Consolidating debt to make repayments more manageable
- Asking for fees and charges to be waived – or moving to a lender with none
Overall, the cash rate rise could mean higher variable mortgage rates, reduction in the borrowing capacity of home buyers, and tighter assessments for prospective homeowners. If you’re concerned about how the cash rate rise will impact your repayments, it’s important to speak to your professional Brisbane mortgage broker to know what your options are.