November 22, 2010
In the lead up to summer holidays most of us want to focus on buying great gifts, finalising travel plans and arranging catch ups with family and friends. We don't want to be panicking about money.
Recent interest rate rises and the prospect of more to come makes that pretty much impossible.
Australia's largest independently-owned mortgage broker, Mortgage Choice, is still seeing almost double the number of weekly requests for broker appointments. This is a direct result of these rate increases. Many calls are from people wondering how they can better cope with rising repayments.
Company spokesperson Kristy Sheppard said, “The November rate rises have jolted many people out of their holiday daydreams by presenting a more pressing priority. There are home loan borrowers from all walks of life who are wondering how to ensure they are well prepared and don't default.”
“Keeping on top of financial commitments is often far from our minds in the weeks before Christmas. Instead of getting in over your head, craft ways for your mortgage to manage itself, such as reworking the budget so it suits today rather than yesterday and scheduling automatic payments for your home loan and other debts to be transferred as soon as your pay goes in.
“This is particularly important if you're travelling over the holidays and unable to regularly check in to your financial obligations. With further rate rises possible in early 2011 it's important for borrowers to keep their seasonal spending under control so they're not in strife when reality bites.”
Mortgage Choice offers the following suggestions for keeping on track.
Redo your budget for today and tomorrow
If you haven't revisited and prepared your budget for the summer holidays then do so now. You should be reassessing it regularly; once a year is nowhere near enough if you have a variable rate home loan. Yesterday's budget landscape is different to today's and tomorrow will bring more changes. Do you really know what your expenditure has been, is and will be over the next three months? What costs you can save on and what extra spending will arrive with Christmas festivities? A budget is there to be followed, so consider all possible activities summer will bring then cost them in now.
Back to the future with loan repayments
Are you prepared if rates rise again next month? In February, March, April…? We have no idea when this will happen, but it's sensible to assume rates will be at least one percent higher tomorrow and set today's budget in motion accordingly. If it takes two years for rates to move that far, then you've built up a fantastic financial buffer and provided yourself with peace of mind. If you can make even higher repayments, that's great. It also pays to remember while extra funds sit in your loan account you're reducing the interest on your loan and you may be able to access these funds should the need arise.
Let your lender do the remembering
Many lenders allow you to set automatic home loan and other debt repayments well into the future, so you don't have to remember to transfer the dollars each time. The funds are simply transferred on the date you select (it's a good idea to make this your pay day or the day after). The only thing left to action is increasing your repayment amount if you have a variable interest rate that increases.
For further information or to arrange an interview, please contact:
(02) 8907 0472 / 0407 416 124