In October 2022, the Reserve Bank of Australia (RBA) increased the official cash rate by 25 basis-points taking the target to 2.60%. This is the fifth increase in a row since firmly moving away from the historic low of 0.10% where it was held for several years during the pandemic.
As inflation hit 6.1% in the June 2022 quarter, RBA governor, Phillip Lowe, said the central bank was on a clear path to bring back inflation to its target range of 2-3%.
How does all this affect home loan borrowers?
All big four banks have raised interest rates accordingly, with the average range now sitting between 5-6%. With further increases expected from the RBA for the remainder of 2022 and potentially beginning of 2023, major banks predict the target could reach 3.5%.
The average loan size for Queensland borrowers has increased 12% between August 21-22 to $523,191. As an example, if you’re paying this average loan size off over a 30-year term, the 2.5% interest rate jump so far means your repayments are costing approximately $800 more per month. A substantial increase for borrowers that may increase further.
With all these fast-paced changes, you may be feeling confused about what to do. Read on for three options both existing and new borrowers should consider in order to protect against interest rate hikes.
- Consider refinancing:
Refinancing is the process of switching your existing home loan to a different lender or changing loan products with your existing lender. If your mortgage is coming off a fixed period or if your lender’s current rates concern you, refinancing could unlock the door to a better setup. Even in the current environment there are still many competitive home loan offers available for owner-occupied and investment loans that could potentially save you thousands in the long run. Read on to see what’s currently on offer.
- Build a budget:
If you’re in the market to purchase a new home, it’s best to build a realistic budget plan with clarity on what you qualify for and what costs will be added onto the property value that you need to keep in mind, such as stamp duty and conveyancing fees. As a legal professional, speaking to an expert of your industry such as Legal Home Loans may open further doorways, as you may be eligible to get a waiver on Lender’s Mortgage Insurance (LMI) and enter the property market with a lower deposit.
- Get your pre-approval before you shop:
It is now more important than ever to gauge borrowing power as well as obtain pre-approval to confirm a purchasing budget before looking at properties. Getting pre-approved gives you greater certainty of your borrowing potential. When you do find the right home, you can act fast and be in a comfortable position to negotiate on price, knowing your upper spending limit.
To see the latest interest rates on offer, visit here.
As Australia’s only mortgage broking service for lawyers, we understand your profession and how you can leverage this to your benefit with lenders. With access to over thirty lenders including major and private banks, we’ll help you select a loan that best suits your unique situation. PLUS, as a member of the Queensland Law Society, you could get $500 cashback at loan settlement.
Think refinancing could be right for you? Or are you eager to buy a home as property prices ease? Chat to us and get ahead of rising interest rates today.
Disclaimer: All information provided in this article is relevant as of 11th October 2022. This article provides general information only and has been prepared without taking into account your objectives, financial situation or needs. We recommend that you consider whether it is appropriate for your circumstances and your full financial situation will need to be reviewed prior to acceptance of any offer or product.
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