Plan Ahead For Rate Rises
Although we have had a period of stable interest rates and reductions, interest rates will inevitably rise again, probably sooner rather than later, and First National Real Estate Pope Nitschke Principal, David Nitschke is advising first home buyers and home owners to plan ahead.
“Rate increases will obviously impact on households, especially in areas where mortgage stress is already being experienced,” Mr Nitschke said.
“Add to this spiraling living costs and a picture emerges that may see affordability once again become an issue. That is why we suggest home buyers and mortgage holders start to plan now so they can get themselves ahead.”
According to David Nitschke, the best time to plan for a change in financial circumstances is before it happens – in that way, you get a head start and minimise any potential negative impacts.
“A detailed budget should be drawn up, factoring in rates at two per cent higher than current levels,” Mr Nitschke said.
“Spending can then be adjusted and any resulting savings set aside for a rainy day.
“The assistance and advice of a financial planner for this exercise is paramount and First National has access to a range of suitably qualified and experienced professionals for just this purpose.”
Another suggestion to consider is consolidating debt under the one umbrella, where interest fees are often considerably less.
A home loan health check could also prove fruitful, especially where mortgages are five years or older.
“There are a lot of new products in the mortgage market and, with the recent government ban on exit fees, moving to a new mortgage could save thousands of dollars,” Mr Nitschke said.
“Alternatively, some financial advisors recommend their clients consider splitting the home loan so that half is on fixed rate and the other half is on a variable rate.
“This could give mortgage holders a lot of peace of mind if rates do start to escalate, but it’s essential to get the advice of a qualified financial advisor who has considered your personal circumstances.”
One of the easiest steps for mortgage holders to take is to make fortnightly repayments instead of monthly or bi-monthly.
“This means the mortgage holder is making 26 payments per year, instead of only 12 or 24, which can make a lot of difference over the life of the loan, producing savings on interest costs and reducing the term of the loan,” Mr Nitschke said.