A Christmas Treat for Homeowners and Mortgage Holders

09 Dec A Christmas Treat for Homeowners and Mortgage Holders

We’re down to the last 16 days before Christmas and I can’t believe how fast time flies! Where did 2016 go?! It was a crazy, bumpy ride and just before the year ends, in the finance side of the world, it sure is giving some serious Christmas treat!

It’s a Christmas treat from RBA as it holds rates at 1.5%

Last December 6^th, RBA decided to leave the cash rate on hold at 1.5%. Although this had been widely predicted by analysts and economists, mortgage holders can surely reap its benefits. You may hear finance brokers (myself included) encouraging you to lock in your rate now or refinance and find a better deal—and you have to! But before I’d get into that, let me give you a refresher on RBA’s role and how does this affect your loan.

“I’m sorry, RBA what?”

Not everyone is well-versed in the world of finance. The common thinking is having the desire to secure a loan, submit the necessary documents to your chosen lender and you will have to pay the mortgage payment depending on the interest rate given. Pretty simple, right? So what does RBA have to do with this? As discussed before in this blog, Reserve Bank of Australia (RBA) is Australia’s central bank. This is where commercial banks get some of the money they lend their clients. Operative word is “some” because there are other factors such as deposits from bank customers. Anyway, so it just makes sense that RBA decides on how much interest rate to set on overnight loans depending on so many factors. If you wish to learn more, you can visit their website.

“RBA holds rates…what now?”

When RBA decides on the rate, it affects other interest rates across the financial sector. It influences the actions of the lenders and borrowers affecting the state of the economy in general. The decision had been widely anticipated, and although this is the lowest the interest rate had reached, experts are warning of rate rises next year. The board might have hold it for now, but it doesn’t mean you should expect it to remain unchanged in the future.

Here are some of the ways to manage the possible impact of rate change in your finances:

• Pay off your credit card debt.

Should rates increase, it just makes sense to settle your credit card debt initially. This will help you pay a smaller amount of interest because of your reduced debt.

• Make extra home loan repayments.

If you have extra cash and your loan allows you to make extra repayments, then take advantage. In that case, once interest rates rise, your outstanding balance is minimised.

• Think about refinancing or consolidating your debts.

With experts warning mortgage holders with rates rise in 2017, think about looking for a more competitive deal than your current loan. As your finance broker, I can help you look for a deal where you can reduce your payment and will help you ease your struggle from making your loan repayments. You also have the option of consolidating all your debt into one loan which will hugely save you a whole lot of stress and money.

• Lock in your rate.

Financial analysts and economists reckon this is the bottom of interest rate. Consequently, locking in a rate now is a wise move. In that case, should interest rates increase, you are secured with this super low rate.

It is indeed a merry Christmas treat since mortgage holders need not worry about their current rate. However, we can’t always be sure of the future so it’s good to always plan ahead! If you have questions, please feel free to contact me, I am more than happy to help, explain the whole process for you, and help you every step of the way. 🙂

Disclaimer:

Credit Representative (486927) is authorised under Australian Credit Licence 389328.

Your full financial needs and requirements need to be assessed prior to any offer or acceptance of a loan product.