{"id":2443,"date":"2022-04-28T00:09:10","date_gmt":"2022-04-28T00:09:10","guid":{"rendered":"https:\/\/royabhishek.in\/urbanbuyer\/how-investors-can-prepare-for-rising-interest-rates\/"},"modified":"2022-04-28T00:09:10","modified_gmt":"2022-04-28T00:09:10","slug":"how-investors-can-prepare-for-rising-interest-rates","status":"publish","type":"post","link":"https:\/\/royabhishek.in\/urbanbuyer\/how-investors-can-prepare-for-rising-interest-rates\/","title":{"rendered":"How investors can prepare for rising interest rates"},"content":{"rendered":"

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\"Realtor,<\/p>\n

Promoted by loans.com.au<\/strong><\/em><\/p>\n

It\u2019s been more than a decade since the last interest rate rise but millions of property owners are now staring down the barrel of years of rising home loan interest rates (and consequently steeper repayments) as the Reserve Bank prepares to bring an end to the era of ultra-low rates.<\/p>\n

While it\u2019s impossible to know exactly how high rates will eventually rise, RBA governor Philip Lowe said it\u2019s \u201cplausible\u201d that interest rates will begin rising this year.<\/p>\n

Analysis by Your Investment Property <\/em>shows Australians with a $500,000 home loan could shell out hundreds extra per month in repayments, depending on how high the cash rate is increased.<\/p>\n\n\n\n\n\n\n\n\n\n\n\n
<\/p>\n

\u00a0<\/p>\n

\n\t\t\t<\/th>\n

<\/p>\n

 <\/p>\n

Interest rate<\/strong><\/p>\n

\n\t\t\t<\/th>\n

<\/p>\n

 <\/p>\n

Monthly repayment<\/strong><\/p>\n

\n\t\t\t<\/th>\n

<\/p>\n

 <\/p>\n

Difference <\/strong><\/p>\n

\n\t\t\t<\/th>\n


\n\t\t<\/tr>\n

<\/p>\n

Average variable investor rate<\/p>\n

\n\t\t\t<\/td>\n

<\/p>\n

 <\/p>\n

3.09%<\/p>\n

\n\t\t\t<\/td>\n

<\/p>\n

 <\/p>\n

$2,132<\/p>\n

\n\t\t\t<\/td>\n

<\/p>\n

 <\/p>\n

–<\/p>\n

\n\t\t\t<\/td>\n


\n\t\t<\/tr>\n

<\/p>\n

Plus 0.25 pps<\/p>\n

\n\t\t\t<\/td>\n

<\/p>\n

 <\/p>\n

3.34%<\/p>\n

\n\t\t\t<\/td>\n

<\/p>\n

 <\/p>\n

$2,200<\/p>\n

\n\t\t\t<\/td>\n

<\/p>\n

 <\/p>\n

$68<\/p>\n

\n\t\t\t<\/td>\n


\n\t\t<\/tr>\n

<\/p>\n

Plus 0.50 pps<\/p>\n

\n\t\t\t<\/td>\n

<\/p>\n

 <\/p>\n

3.59%<\/p>\n

\n\t\t\t<\/td>\n

<\/p>\n

 <\/p>\n

$2,270<\/p>\n

\n\t\t\t<\/td>\n

<\/p>\n

 <\/p>\n

$138<\/p>\n

\n\t\t\t<\/td>\n


\n\t\t<\/tr>\n

<\/p>\n

Plus 0.75 pps<\/p>\n

\n\t\t\t<\/td>\n

<\/p>\n

 <\/p>\n

3.84%<\/p>\n

\n\t\t\t<\/td>\n

<\/p>\n

 <\/p>\n

$2,341<\/p>\n

\n\t\t\t<\/td>\n

<\/p>\n

 <\/p>\n

$209<\/p>\n

\n\t\t\t<\/td>\n


\n\t\t<\/tr>\n

<\/p>\n

Plus 1.00 pps<\/p>\n

\n\t\t\t<\/td>\n

<\/p>\n

 <\/p>\n

4.09%<\/p>\n

\n\t\t\t<\/td>\n

<\/p>\n

 <\/p>\n

$2,413<\/p>\n

\n\t\t\t<\/td>\n

<\/p>\n

 <\/p>\n

$281<\/p>\n

\n\t\t\t<\/td>\n


\n\t\t<\/tr>\n

<\/p>\n

Plus 1.25 pps<\/p>\n

\n\t\t\t<\/td>\n

<\/p>\n

 <\/p>\n

4.34%<\/p>\n

\n\t\t\t<\/td>\n

<\/p>\n

 <\/p>\n

$2,486<\/p>\n

\n\t\t\t<\/td>\n

<\/p>\n

 <\/p>\n

$354<\/p>\n

\n\t\t\t<\/td>\n


\n\t\t<\/tr>\n

<\/p>\n

Plus 1.50 pps<\/p>\n

\n\t\t\t<\/td>\n

<\/p>\n

 <\/p>\n

4.84%<\/p>\n

\n\t\t\t<\/td>\n

<\/p>\n

 <\/p>\n

$2,635<\/p>\n

\n\t\t\t<\/td>\n

<\/p>\n

 <\/p>\n

$503<\/p>\n

\n\t\t\t<\/td>\n


\n\t\t<\/tr>\n

<\/p>\n

Plus 1.75 pps<\/p>\n

\n\t\t\t<\/td>\n

<\/p>\n

 <\/p>\n

5.59%<\/p>\n

\n\t\t\t<\/td>\n

<\/p>\n

 <\/p>\n

$2,867<\/p>\n

\n\t\t\t<\/td>\n

<\/p>\n

 <\/p>\n

$735<\/p>\n

\n\t\t\t<\/td>\n


\n\t\t<\/tr>\n<\/tbody>\n<\/table>\n

The analysis assumes a $500,000 mortgage over a 30-year loan term with monthly principal and interest (P&I) repayments.<\/em><\/h6>\n

Many economists believe interest rates could start increasing as early as May this year, after Australia\u2019s Consumer Price Index (CPI) rose 5.1% over the twelve months to the March 2022 quarter.<\/p>\n

Economists predict the cash rate could go as high as 1.75% in 2024. It currently stands at a record low of 0.10%.<\/p>\n

To make matters worse, newer investors who have only purchased within the last ten years haven\u2019t experienced a rate rise before, paving the way for a debt cliff as owners struggle to manage mammoth home loans as a result of the property boom.<\/p>\n

If you\u2019re worried about how you will manage your mortgage repayments when interest rates rise, you can take steps now to start preparing.<\/p>\n

Make extra repayments now<\/h2>\n

If your home loan interest rates are on the lower side, try making extra repayments into your mortgage before rates begin rising. You could do this by adding a little extra into your monthly repayments, making more frequent repayments, or depositing a lump sum like your tax refund.<\/p>\n

You may want to check that your lender hasn\u2019t placed any restrictions on making more frequent or extra repayments, especially if you have a fixed loan.<\/p>\n

Build a buffer in your offset account<\/h2>\n

Dr Lowe advised borrowers to \u201cmake sure you have buffers\u201d when asked what advice he would give to borrowers preparing for interest rate hikes. One way you could do this is by making extra payments into your mortgage offset account if you have one.<\/p>\n

That money is then ‘offset’ against the balance of your home loan, so you only pay interest on the difference\u00a0between the loan amount and the amount in your offset sub-account. This means you pay off the loan faster and with less interest.<\/p>\n

Consider refinancing your loan<\/h2>\n

If your current lender’s interest rates are on the high side, it could be worth picking up the phone and asking them for a better deal, particularly if you have benefitted from the recent house price boom and now have a decent chunk of equity built up. Your bargaining power could be significantly stronger, especially if you have been diligent with making repayments on time.<\/p>\n

If your current lender isn\u2019t willing to budge, it may be time to switch to another lender with a more competitive rate. We have some of the lowest rates on investor loans in the market, starting from just 1.99% p.a. (2.71% p.a. comparison rate) on our Smart Booster Investor Bundle<\/a>, which allows you to bundle your investment loan with your home loan on your owner-occupied property. With both owner-occupied and investment loans starting with a 1, and no monthly or ongoing fees, you could save thousands.<\/p>\n

Find out if you qualify today.<\/a><\/p>\n

————————————————-<\/p>\n

\"\"Marie\u00a0Mortime<\/strong>r is\u00a0Managing Director of loans.com.au<\/a>, one of Australia’s largest online lenders. Since\u00a0Marie\u00a0started the business in 2011,\u00a0Marie\u00a0has grown loans.com.au<\/a> into a company with $6 billion worth of home and car loans.\u00a0Marie\u00a0is dedicated to improving financial literacy for all Australians and is passionate about the FinTech industry in Australia.\u00a0When she isn’t at work, she loves to spend time with her husband and two young children.<\/p>\n

loans.com.au<\/a> is an online lender for home and car loans. Since 2011, Aussies have trusted our locally based loans.com.au<\/a> team to support them with low home loan and car loan rates, approved quickly through the online loans.com.au<\/a> app.<\/p>\n<\/p><\/div>\n


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