In July the Reserve Bank of Australia (RBA) continued its trend of increasing the cash rate, moving it for the third month in a row from 0.85% to 1.35%.
According to our market research, all market lenders, including LJ Hooker Home Loans, increased variable interest rates on home loans in line with the cash rate increase last month. This means homeowners with variable rates or split loans will have already noticed an increase in repayments.
On top of this, we are also seeing fixed rates increasing across the board, particularly in the shorter terms. For example, one and two-year fixed rates for owner occupier principal and interest (P&I) loans have increased by more than 1% in recent months. This means people looking to refinance will find interest rates have significantly increased regardless of the type of loan you are considering.
What can I do if my repayments are getting too high?
If you find your repayments have jumped to a level you find difficult to repay, it is a good idea to review your options.
For example, speaking with a lending specialist could help determine whether refinancing is right for you. While lenders across the board have increased rates, you may find that the rates on offer for new borrowers will make it worthwhile considering a switch. If you have increased equity due to a rise in the value of your property, this may also help you secure a lower rate with a new lender.
Our lending specialists can help you access free property and suburb reports that can detail the current market value of your property.
Other ways a lending specialist may be able to help include:
- Consolidating debt: If you have loans outside of your mortgage, such as a car or personal loan, or credit card debt, you may be able to roll them into your home loan. This could result in a lower interest rate and simpler repayments
- Reviewing existing loan: If there are features attached to your home loan you do not use, it could be possible you could transition to a different loan with lower fees or interest rate
- Repricing: Your lender may be open to lowering your interest rate or fees, especially if your equity has changed since your last review or if your rate is not competitive
Silver lining for buyers: property market cools
While home loan interest rates have been climbing, on average, house prices across capital cities have decreased over the last month. Sydney house prices dropped 1.6%, Melbourne prices dropped 1.1% and Hobart 0.2% over the month to 30 June. Brisbane has slowed with house prices growing only 0.2% over the time frame, Perth grew by 0.4%, Darwin 0.9%, Canberra 0.3%, with Adelaide showing the biggest growth of 1.3%.
This could be good news for investors and buyers as it signals decreased competition. The increase in the cash rate is also good news for savers who are likely to see increased interest rates on their savings accounts, which could help save for a deposit faster.
If you are looking to purchase, or you would like to explore options to save on your home loan, please fill in your details below and one of our local lending specialists will be in touch.
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This article is prepared based on general information. It does not take into account individual financial objectives or needs and is not financial product advice.