Economists are predicting more interest rate rises in the near future, as the Reserve Bank of Australia (RBA) looks to curb inflation. This could leave many households hundreds of dollars worse off, as they struggle to keep up with increased loan repayments.
The RBA has already raised rates for a third straight month, and some experts believe there could be another rise next month. This would add even more pressure on struggling families, who are already dealing with escalating living costs around the country. According to ABC news, inflation is currently sitting at 5% but is forecast to reach higher by the end of the year.
If the Reserve Bank of Australia passes on all of its predicted rate rises, the average Australian mortgage owner could pay an extra $991 on their mortgage by the end of the year. (source: news.com.au)
According to the Craig James, chief economist of CommSec believes that the RBA will continue to increase the cash rate by 25 points basis in the following months.
Using this prediction, we can say that a mortgage holder with a 30-year loan with an average variable interest rate of 3.93% and an average mortgage of $615,000 might expect an increase in repayment costs of $991 from July to December.
Because of the rising interest rates and inflation, many households will experience financial pressure during what is already an expensive time of year. Families would need to find ways to cut back on another spending in order to make their mortgage payments.
With interest rates expected to rise continuously, now is the time for households to start budgeting and looking for ways to save money. Even small changes can make a big difference over time, so it's worth exploring all options.
Another way to save money is by refinancing your mortgage. This can help you lower your monthly payments, freeing up extra cash for other expenses. And other options could be home equity loan or line of credit. Since this can give you access to funds that can be used for home improvements, debt consolidation, or other purposes.
On the other side, if you're looking for ways to reduce your monthly expenses, consider cutting back on unnecessary luxuries. For example, you might cancel your cable TV subscription or switch to a cheaper cell phone plan. You could also save money by cooking at home more often, rather than eating out.
If you're like most Australians, you're probably feeling pretty anxious about the rising interest rates. There's no sugar-coating it, because an interest rate rise would be bad news for many Australian families. But by being prepared and making some smart financial decisions, you can help lessen the impact on your household.
And remember, if you have any concerns about how higher mortgage rates will impact your finances, do not hesitate to speak and reach out to your lender or financial advisor for more advice.