The Reserve Bank of Australia has decided to increase the interest rate by 0.5%, the second increase in 2 months. Previously, they had already raised the rate by 0.25%, bringing the total increase to 0.85%, the most significant increase in over 20 years.

So the question is, how will this affect Australians, especially with the current rise in the cost of living that many western countries are experiencing.  

Mortgages and Home Owners

Historically, the big 4 banks will pass on the interest rate increase almost immediately. But, this doesn’t mean that there isn’t hope. 
Those with a fixed interest rate home loan will have a little time to consider their options. However, those with a variable interest rate may want to take action. Mortgages aren’t “set and forget”, there are opportunities to reach out to your bank and talk to them about what they can offer you. 
Or, if you want a little bit of experience on your side, mortgage brokers can help you look at your options. The best thing about a mortgage broker is they have access to dozens of mortgages and banks and that their services are paid for by the bank, so their advice is free.
They can help broker you a new deal and save you money and keep your head above water during these trying times. The best thing you can do is get ahead of the problem and find out your options! 
You can contact our team here to discuss your options.

Renting

If the mortgages increase in price, it is fair to assume that the rental prices will increase to compensate for the difference. 
Renters may need to tighten their belts with rental pricing going up. So it may be time to look at your budgets. You can use your budgeting tool to help you get your living expenses down.   
For those who are able, there is always the option to buy.    

Buyers Market

The interest rate increase will have a positive effect on the housing market for buyers. The Australian housing market, in particular, Sydney and Melbourne have been experiencing a pricing bubble for the better part of 20 years.

The increase could possibly halt that bubble and the price of homes could decrease, leaving an opportunity for buyers to pick up a good deal or for First home buyers to get into the market. 

Though the interest rates are higher, first home buyers still have many ways to supplement their first home purchase, including First Home Owners Grant, the First Home Loan Deposit Scheme as well as the First Home Buyers Assistance Scheme. 

 
You can check out your borrowing power by using our Borrowing Power Calculator here.

It's rough at the moment, for the average Australian. It's important to get on top of your finances. There is a huge amount of resources available for those who need help. The ZENRG website has a huge amount of useful resources, like calculators, podcasts and blogs that will help give you insight.   

Need some help with your a home loan?

Our mortgage brokers are available to help you. Enquire now.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.