The Mortgage & Finance Association of Australia (MFAA) urges borrowers to get ready for a an interest rate rise that will definitely take place within the next six months, which means that they will be dealing with higher mortgage costs. In October, the RBA decided to freeze the interest rate at 4.5%, which took both the banking industry and consumers by surprise.
The MFAA further explained that the interest rates were on hold because information from the most recent Consumer Price Index was unavailable at the time. This was coupled with the statement that “there is a likelihood they will rise” within the foreseeable future, and that the consumer should prepare by providing for the change in the household budget.
Phil Naylor, the MFA’s CEO, provided the following tips to make adjusting the household budget less difficult:
– If you’ve had your mortgage for several years, meet with you mortgage broker or bank to see if your loan still accommodates your current financial situation. You may be in need of what he refers to as a “home loan health check,” and may also be able to save thousands of dollars over time by working out a new deal with your lender.
– After reviewing the status of your current mortgage, discuss your options with whoever holds it. It is possible that an adjustment can be made, including the elimination of certain fees if you work out a new deal, a reduction in the interest rate, or combining your loans in a single package. If the choices you are offered don’t seem to work in your favour, look for another accredited mortgage broker who can help you work out a deal that is tailor-made for your particular needs and circumstances.
– If it’s been a while since you have reviewed your budget, that should be your next step, and your will definitely want to keep your Christmas spending in check. This is the season when people who are usually cautious find that their finances are out of control, even in the best of times, and it often takes months for them to get back on their feet again.
– If others debts, such as credit cards, are undermining you income, set up a plan for paying them off—and initiate it at once. Then you will be ready for the rise in interest rates that the RBA is sure to initiate.