Interest Rates are rising. While this can be good news for savers, it can also have a significant impact on borrowers. If you’re concerned about rising interest rates, here are some things you can do to protect yourself.
Review Your Mortgage
One of the most significant impacts of rising interest rates is on mortgages. If you have a mortgage with a variable interest rate, your monthly payments will increase as interest rates go up. One option is to switch your mortgage to a fixed interest rate. This can provide stability and predictability in your monthly payments, and help you avoid the impact of rising interest rates.
There is typically a premium you pay for a fixed-rate loan, as of February 2023, fixed rates are around 0.50% p.a higher than variable-rate loans.
Let us review your mortgage for you, we are the experts! Also read our other blog – The Importance of Negotiating Your Interest Rate.
Consolidate Your Debt
If you have high-interest debt, such as credit card debt or personal loans, rising interest rates can make it more challenging to pay off your debt. One solution is to consolidate your debt with a personal loan or a balance transfer credit card. This can provide a lower interest rate and make it easier to pay off your debt faster. Did you know that you can consolidate your credit card and personal loan debt into your home loan? Contact us for more information.
Increase Your Savings
Rising interest rates can also benefit savers. If you have a savings account, you may see an increase in the interest rate you earn on your savings. This can be an excellent time to increase your savings rate and take advantage of the higher interest rates. If you have a long-term savings goal, such as retirement, consider investing in a high-yield savings account to earn more interest.
If you have an offset account attached to your home loan, to maximise the interest saving on your home loan, we always generally recommend placing the majority of your savings in this account.
Adjust Your Budget
If you’re concerned about the impact of rising interest rates on your finances, it may be time to adjust your budget. Take a close look at your monthly expenses and see where you can cut back. This may mean reducing your discretionary spending or finding ways to save on essentials like groceries or utilities. By making these adjustments, you can free up more money to pay down debt or increase your savings.
Rising interest rates can have a significant impact on your finances, but there are steps you can take to protect yourself. Refinancing your mortgage, consolidating your debt, increasing your savings, and adjusting your budget are all effective strategies for navigating the impact of rising interest rates. By taking these steps, you can stay financially stable and protect your long-term financial goals.