Mortgage pain expected as rates look set to rise
With a growing number of forecasters predicting that home loan interest rates are getting set to go up, rather than down, borrowers are being urged to plan for potential rises in their repayments now.
Interest rates have been at historical lows for most of the year but news.com.au property expert Anthony Keane warns, "if the current strength in the share and property markets leads to increased confidence and rising inflation you can bet that the Reserve Bank will be quick to raise rates from their current record low levels, to prevent things from getting dangerously hot."
No one knows for certain when the inevitable rise will happen but it is never too early to start preparations so that you can avoid mortgage stress. And let's not forget that the banks have been known to announce their own out of cycle rates announcements so be prepared that even if the RBA doesn't increase rates in the new year, your bank may.
To find out how much rate increases will cost and how much extra you'll need to budget for, try Mozo's rate change calculator. Let's look at the following scenario. On a $350,000 mortgage with a current interest rate of 5.10% monthly repayments are now $2067. A 0.25% rate increase adds an extra $51 to your repayments and if rates go up 0.75% you'll be paying $2223 a month, an increase of $156.
Next step is to make sure you are on the best rate you can get. Talk with your current lender to see if you could get a better deal with them or compare home loan interest rates of all banks on Mozo to find a loan that suits you.