Another month, another interest rate hike by the Reserve bank of Australia (RBA), which happened for four straight months!
The Reserve Bank of Australia (RBA) raised the official cash rate by an additional 50 basis points to 1.85%. If you are a mortgage owner, you may wonder, when will the interest rates stop increasing and go back to normal? Are there any signs that RBA will stop increasing rates?
In this article, we will look for any signs that the rate hike will stop and how you can still keep going despite the mortgage stress you are experiencing.
The monthly increase in interest rate is a continuous strain for Australian households who make higher mortgage repayments, as they struggle to make ends meet with the rising petrol, energy costs, and grocery prices.
But even though the RBA continues to increase rates for the fourth time and third double hike in a row, experts have seen indications that the potential rates may stop by the end of the year.
According to the economists of Australia's four largest banks, there is still an expected increase to at least 2.6% and as much as 3.35% by the end of the current year or early next year. (source: Bloomberg)
There may also be another 50 basis point hike in September. However, PopTrack senior economist Eleonor Creagh pointed to the changes in RBA Governor Philip Lowe's monthly speech that implies the RBA might be considering lowering the rate of hikes or pausing to evaluate their impact.
She also added that the state of the economy would dictate how quickly and how high the cash rate increases and whether the RBA stops at any point.
The expected rise is likely to increase the cost of the bank's variable-rate mortgage products. As a result, this would put further pressure on household budgets and could lead to more mortgage stress.
The RBA urge households to budget carefully and make sure they can afford the increased costs. It also suggested that people consider fixing their mortgage rates to protect themselves from further rises. Yet, this is another blow for households already struggling with high debt levels.
In a speech in July, Michelle Bullock claimed that half of the owner-occupiers with variable-rate mortgages were two years ahead on their payments. However, many, like Mortgage Stress Victoria's legal director Matthew Martin stated that those behind on their payments might face a difficult situation. (source: SBSnews)
When it comes to mortgages, the interest rate is everything. Even a small change can mean a big difference in your monthly payment – and how much you ultimately pay for your home.
It can be worrisome when rates start going up, as recently. But you can still do some things to ease the financial pressure. Here are a few tips:
Do you have a Netflix subscription? Or maybe you're subscribed to Spotify, Stan, Amazon Prime, or Apple TV?
While these subscriptions can be great for entertainment and convenience, they can add up to many monthly payments. In fact, you might be surprised at how much you're spending on subscriptions.
Then there are also your favorite takeaway places – while eating outside is fantastic, it's better to control yourself if you spend too much on it.
Remember that if you're trying to get your finances under control, it's a good idea to take a close look at your monthly expenses and see where you can cut back or make savings.
If you struggle to make regular payments, don't hesitate to reach out to your creditors. Many companies are willing to negotiate payment plans or offer other assistance.
Some companies may be willing to lower your interest rate, waive late fees, or allow you to make smaller payments over a more extended period. Others may be willing to work out a repayment plan that fits your budget.
It's important to remember that each creditor is different, so you'll need to take the time to find out what options are available. But it's worth researching and making a call – you may be surprised at how helpful your creditors can be.
One way to save money is by refinancing your mortgage. It may not be suitable for everyone, but it's worth considering if you want to save money on your mortgage payments.
Shop around for the best refinance terms and rates. And compare multiple offers before you make a decision.
Be sure to consider all the costs associated with refinancing, including closing costs.
If you're feeling overwhelmed by your finances, it's a good idea to seek professional help. A financial planner can provide free and confidential advice to help you get back on track.
Do not forget that many other people are experiencing the same things as you. And with a bit of effort, you can get your finances under control and keep going despite the increase in interest rates.