The mortgage repayments of millions of homeowners around the country could potentially rise within weeks if the Reserve Bank of Australia (RBA) starts increasing the cash rate target earlier than previously expected.
Rising inflation, low unemployment and a pick-up in wage growth mean economists and the big banks now expect that the RBA could begin raising rates from June this year.
It’s expected the RBA’s first hike will be 0.15 per cent to get the cash rate to 0.25 per cent, with further rises of 0.25 per cent increments following the historical pattern seen in previous rate-tightening cycles.
But while the official interest rate – and therefore variable interest rates – may rise sooner than previously forecast, there is still time for homeowners to take advantage of current conditions.
Here are three things homeowners can do while rates are still low.
1. Review your home loan
The cash rate is at a record low, and lenders are still offering attractive rates, so it’s the opportune time to check in on your mortgage.
Making time now to speak to a broker or lender about whether your current interest rate and loan structure are still right for you could help ensure you’re in the best position before rates rise.
2. Enquire before your fixed term expires
For borrowers on a fixed-rate home loan, it’s worth reaching out to your broker or lender at least four to six weeks before your fixed term expires to explore your upcoming options.
3. Future-proof your home loan
When reviewing your home loan it’s not only important to ensure it suits you now, but also that it will continue to meet your needs years into the future.
Borrowers with fixed-rate home loans may need to pay substantial break costs if they sell or refinance before the end of the fixed period, so it’s a good idea to plan ahead for how circumstances might change.
It’s also important to keep in mind that interest rates are expected to continue to rise over the course of the year. So even if the financial benefits of refinancing aren’t immediately obvious, reviewing your home loan now could help ensure you are in a better position in the future.
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