The Reserve Bank of Australia (RBA) today increased the cash rate for the seventh month in a row. The cash rate increased from 2.6% to 2.85%.
Australians are feeling the pinch as interest rates rise across the board. Whether paying off a mortgage or saving to purchase property, the cost to service a loan is increasing. This combined with high inflation, growing cost of living and relatively stagnant wage growth has made it an important time to double down on saving money where possible.
While you may not be able to avoid increasing interest rates if you are on a variable interest rate or an expiring fixed rate loan, there are a number of ways you could still save money.
Six tips to save in an interest-rate-rise environment
Some ways you could save money while interest rates continue to rise include:
- Refinance: Get your broker to check if you can reprice or refinance your loan to a lower rate or for lower fees.
- Consider your package: Your broker can also check if your home loan package suits your needs. Switching to something more basic if you are not using all the features could save you in fees. Or if you would make use of additional features that could save you money, such as an offset account, your broker can run the calculations for you to determine if it is worth switching.
- Change the term: You could consider extending the term of your loan to lower repayments. Keep in mind this means you will be paying more over the life of the loan, but is an option if you are experiencing cash flow problems now.
- Check your budget: By making note of all your expenses, you could identify areas where spending could be reduced. This could include memberships, subscriptions or luxury purchases. This calculator can be a good place to start.
- Offset account/redraw facility: If you have an offset or redraw facility, now is a very good time to make use of them. By putting money into your offset or additional repayments on your loan, you will save on interest which becomes even more money as interest rates rise.
- Extra repayments: If your loan allows for it, consider making extra repayments now, which can save you money in the long run as interest rates continue to rise.
If you are looking for ways to save on your home loan, speak to your broker for a free, no-obligation home loan health check. They can also discuss your options and right strategy to achieve your goals.
