The Reserve Bank has clearly signposted that an increase to the cash rate is in the pipeline in 2022. While there is ongoing speculation about the timing of the first raise to the cash rate, and the number of cash rate rises we are likely to see, the expectation that mortgage holders will be paying more in the months and years ahead is well set in the lending market.

 

While fixed rates have already seen rises (particularly longer-term fixed rates) from historic lows in 2021, variable rates remain at record-lows, and there are a range of lenders and mortgage providers with variable rates lower than they have ever been. When coupled with the gap between Owner Occupier rates and Investor rates shrinking over the last 6-12 months, it is an important time to review your current mortgage to make sure you are adequately positioned for the changing landscape through the remainder of 2022 and beyond. Most investors who have not reviewed their rate in the last 6 months will find there are lower rates available in the market, often even at their current lender.

 

So what can you do to prepare? Here are five tips:

 

1. Calculate how much your repayments would increase if your home loan rose by anywhere from 0.25% to 1.50% in the years ahead, and make appropriate adjustments and preparations in your weekly/fortnightly/monthly budget to accommodate this ahead of time

2. Consider a small increase to your usual repayments now, while rates are low – especially with the effective use of an Offset account – to insulate yourself from the projected rate rises ahead

3. Increase your savings and/or emergency fund, so you’re covered if your monthly repayments increase. A quick review of your expected property costs (such as council rates, body corporate/strata fees and other utilities and insurances) will also be beneficial from a cash flow perspective with interest rates expected to rise.

4. Work with your mortgage broker to ensure you are getting the best deal your current lender can offer – or take your business to a lender who can offer you the deal in your circumstances. If you are not on the best deal now, an increase to your interest rate could leave you further behind the pack

5. Consider your options to change from a variable-rate loan to a fixed-rate loan – or perhaps even a split loan to have ‘the best of both worlds.’ While fixed rates are currently higher than variable rates at most lenders, the security and certainty of a fixed rate may provide comfort over a longer period in an uncertain rate environment

 

If you have a mortgage on your principle place of residence, now is likely a great time to get ahead on your repayments to ensure any increases to your non-deductible interest charges are minimal from any rate rises. Some lenders also offer further discounted pricing when you have both your owner occupier & investment loans held with them together.

 

If you would like to speak with an experienced mortgage professional to better understand your options, and review your current position, now is a great time to take control of your investment and ensure you are not paying more than you should be.

 

Use the contract form below to get in contact with our team, and arrange a free, no-obligation consultation to review your current lending and the best options for you.