How do you deal with changes in interest rates during the life of your home loan?

3 Plan ahead

The third step to dealing with interest rate changes is to plan ahead for different scenarios. You should have a clear idea of how much you can afford to pay each month, and how much buffer you have in case of unexpected expenses or income loss. You should also review your loan regularly and adjust your repayments accordingly. For example, if interest rates go down, you could pay more than the minimum and reduce your principal faster. If interest rates go up, you could reduce your discretionary spending and save more for emergencies.

4 Consider other strategies

The fourth step to dealing with interest rate changes is to consider other strategies that could help you manage your loan better. For example, you could split your loan into fixed and variable portions, to enjoy the benefits of both stability and flexibility. You could also use an offset account, which is a savings account linked to your loan, to reduce the amount of interest you pay. You could also consolidate your debts, such as credit cards and personal loans, into your home loan, to simplify your repayments and lower your interest rate.

5 Seek professional advice

The fifth step to dealing with interest rate changes is to seek professional advice if you are struggling to keep up with your repayments or facing financial hardship. You should contact your lender as soon as possible and explain your situation. They may be able to offer you some options, such as extending your loan term, reducing your repayments, or pausing your repayments for a period. You should also seek help from a financial counsellor, who can provide you with free and confidential advice on how to manage your debts and budget.

6 Stay informed

The sixth step to dealing with interest rate changes is to stay informed about the market trends and the factors that influence interest rates. You should keep an eye on the official cash rate, which is set by the Reserve Bank of Australia and affects the cost of borrowing for lenders and borrowers. You should also follow the news and reports on the economic conditions, such as inflation, unemployment, growth, and consumer confidence. By staying informed, you can anticipate and prepare for any changes in interest rates and adjust your strategy accordingly.