Rates Are Up Again. Here Are 3 Practical Ways to Reduce the Pressure
The Reserve Bank has increased interest rates again, taking the cash rate to 4.60%.
And for mortgage holders, it is landing at a difficult time.
Home loan repayments are higher, petrol prices are elevated, groceries and everyday expenses remain expensive, and household budgets are being squeezed from several directions at once.
The RBA has also made it clear that further rate increases are possible if inflation remains too high.
That can feel frustrating because most of those things are outside your control.
But there are still practical steps you can take.
Here are three areas we believe every mortgage holder should review.
Check your home loan rate before simply absorbing the increase
When the RBA increases the cash rate, many lenders increase their variable home loan rates.
But that does not automatically mean you should simply accept the new repayment.
Your existing lender may have a better rate available.
Another lender may be offering a sharper deal.
Or your loan-to-value ratio may have improved since you first took out your loan, potentially putting you in a stronger pricing position.
This is why regular home loan reviews matter.
At Kredi, we proactively review the interest rates of our existing customers rather than waiting for them to contact us.
Where appropriate, we approach the lender and request a pricing review.
Sometimes the lender reduces the rate.
Sometimes refinancing makes more sense.
And sometimes the existing loan is already competitive and the right decision is to leave it alone.
The important thing is that the rate is being checked.
Even a relatively small rate reduction can help offset part of an RBA increase.
For example, if your lender increases your rate by 0.25%, but a pricing review results in a 0.15% reduction, you have effectively reduced the impact of that increase.
You cannot control the cash rate.
But you can make sure you are not paying more than you need to.
Look at the whole household budget, not just the mortgage
When rates rise, it is easy to focus entirely on the home loan repayment.
But for many households, the pressure is coming from several places at once.
Petrol.
Groceries.
Utilities.
Insurance.
Subscriptions.
Car loans and credit cards.
School and family expenses.
Individually, some of these increases may seem manageable.
Together, they can take a significant bite out of monthly cash flow.
This is a good time to do a simple household review.
Look at:
- your mortgage rate
- electricity and gas plans
- insurance premiums
- unused subscriptions
- credit card interest
- personal or car loans
- discretionary spending
- and recurring expenses that may have gradually increased
You do not need to cut everything enjoyable out of your life.
The objective is to identify the expenses where you may be paying more than necessary.
A saving of $40 here, $60 there and $100 somewhere else can make a meaningful difference across a month.
And importantly, those savings can help create breathing room around a higher mortgage repayment.
Get ahead of the repayment pressure before it becomes a problem
One of the biggest mistakes borrowers can make is waiting until they are already struggling before reviewing their options.
If your repayments are starting to feel uncomfortable, act early.
Depending on your circumstances, there may be several options worth exploring.
That could include:
- restructuring your home loan
- refinancing to a more competitive lender
- consolidating higher-interest debts
- reviewing fixed and variable loan options
- changing repayment frequency
- using an offset account more effectively
- reviewing your loan term
- or simply building a clearer household cash-flow plan
Not every strategy will be right for every borrower.
And some options, such as extending a loan term or consolidating debt, may reduce repayments in the short term but increase total interest costs over the life of the loan.
That is why the aim should not simply be to achieve the lowest possible monthly repayment.
It should be to find a structure that improves cash flow while still supporting your longer-term financial goals.
Small savings matter more when rates are rising
When interest rates are falling, borrowers can sometimes afford to be less engaged with their home loan.
When rates are rising, that becomes much more expensive.
A rate that was competitive twelve months ago may no longer be competitive today.
Your financial position may also have changed.
You may have paid down your loan.
Your property value may have changed.
Your income may have increased.
Or new lender offers may now be available.
That is why we believe a mortgage should not be something you set up and forget about for 30 years.
At Kredi, our ongoing service includes proactive rate reviews for our customers.
We regularly look at whether their existing rate remains competitive and, where appropriate, negotiate with the lender or consider other options.
Sometimes that can partially or even fully offset the impact of a rate increase.
Sometimes it simply confirms that the existing loan remains the right one.
Either way, you know the loan has been reviewed rather than simply left on autopilot.
Feeling the pinch? Start with the things you can control
Nobody knows exactly what the RBA will do next.
But you do not need to predict the next rate decision to take action today.
You can:
Review your rate.
Review your household expenses.
Review your loan structure.
If your mortgage repayments are starting to bite, the worst option is often doing nothing and hoping conditions improve.
A home loan review can help you understand whether your current loan remains competitive and whether there are practical ways to reduce the pressure on your household budget.
Sometimes the solution is a refinance.
Sometimes it is a better rate with your existing lender.
And sometimes it is simply knowing that your current setup is already the right one.
Either way, it is worth checking.