How to get ahead of rate hikes
Borrowers whose budgets are unlikely to hold up against this rate hike – or the forecasted future hikes – should take action now.
1. Refinance the mortgage – potential annual savings: $13,319
The average owner-occupier who has not renegotiated their loan since the rate hikes began is on an estimated rate of 6.11 per cent.
However, we expect at least 10 lenders will still offer rates under 4.75 per cent once this latest hike filters through. That’s a 1.36 percentage point difference, equivalent to over 5 standard RBA hikes.
If a borrower with $500,000 owing at the start of the hikes refinanced to a rate of 4.75 per cent, they could save $13,319 over the next two years and significantly more over the longer term.
2. Focus on your food bill – potential annual savings: $5,720
For most families, food is the second biggest expense behind the mortgage repayments or rent, which makes honing down on your food bill a strategy worth trying.
Households can do this in a range of different ways from buying in bulk, to shopping at two or more supermarkets to capitalise on specials, or simply switching to cheaper brands within your regular store.
3. Drive down transport costs – potential annual savings: $908
Transport costs are the third biggest expense for many households, after the mortgage or rent and food.
For a quick cash injection, selling a second car could potentially see you pocket tens thousands of dollars. However, if this isn’t an option, think about shopping smarter when it comes to loading up the tank.
On average, Australians spend $96.93 filling up the car each week, according to the Australian Automobile Association. However, being mindful of where you fill up can potentially save you hundreds over the course of a year. Be sure to shop around!
For the average driver filling up their tank once per week, saving $0.16 per litre would save $454 per year at the pump, while a $0.33 per litre discount would equate to a $908 saving per year.
4. Increase your income – potential annual post-tax increase: $3,843
Asking your boss for a pay rise will see your income go up without having to work longer hours.
If you haven’t had a salary increase recently, now is the time to ask. According to the RBA, wages growth is forecast to rise to 4.25 per cent late this year.
For a family of four, where one parent earns the average full-time wage and one parent works part time at half the rate, a wage increase of 4.25 per cent could translate into approximately $3,843 in post-tax dollars.
While this kind of increase isn’t in line with current inflation, it will help partially offset the cost of rising rates.
5. Other options your bank can offer
There are many ways your bank can help for example extending the life of your home loan or go on an interest – only fixed term. For more ways on how you can save on your current mortgage, make an appointment with me today!
*Source ratecity.com.au