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For many homeowners, rising interest rates are becoming an increasing cause for concern.

Interest rate hikes triggered by the Reserve Bank of Australia (RBA) lifting the official cash rate are expected to put pressure on many household budgets.

Further rate rises are predicted and it could pay to start planning ahead.*

Here are five things you can do to prepare for any rate rises.

1. Work out how a rate increase could impact your repayments

The first step in preparing for an interest rate rise to get an idea of how your finances will be impacted by an interest rate increase.

Use bcu’s home loan comparison calculator to work out how much extra you’d need to pay if various rate increases occur and if you need to make any changes to your household spending.

2. Fine tune the budget

One way to future-proof your finances is to review your budget to identify any areas where you could save money or cut out expenses.

  • Make a list of your bills, such as electricity, car or home insurance and internet, and find out if there are any better deals available that meet your needs. Government comparison websites, including Energy Made Easy and Private Health, can take the time and hassle out of comparing.
  • Go through your other expenses and consider cancelling any unused subscriptions or memberships. Think about whether you really need more than one streaming service or if you’re actually using your gym membership.
  • Take a good look at your food bills and think about ways to reduce your bills. This could be reducing eating out to one night a week, committing to picking up food orders instead of using UberEats, or shopping at Aldi.
  • Make sure you’re taking advantage of any loyalty discounts or customer rewards programs to reduce future expenses.

3. Build a repayment buffer

Consider making extra repayments on your home loan so you’ll be ahead when interest rates rise.

How much extra money you add will depend on your situation, but even small payments could help you to pay off your home loan sooner.

If you’re not able to make extra repayments, think about switching to a home loan that has an offset account attached and use it for your savings or income help to reduce the amount of interest you pay.

4. Consider fixing your rate

Consider a fixed interest rate for a portion of your loan so your repayments will stay the same regardless of any rate rises.

Knowing exactly what your repayments are can help you to get the most out of your budget or increase your savings.

5. Look for a better deal

You should review your home loan every year, especially if your circumstances change, to make sure it’s still helping you to meet your financial goals.

Work out which features of your current loan you want to keep and compare the interest rates on similar loans.

Even a small interest rate reduction could save you thousands of dollars over the life of your loan.

Use bcu’s home loan refinance calculator to work out if how much you could save by switching to a better deal.

*Source: Reserve Bank of Australia


Important information

Information on this website is general and has been prepared without taking into account your objectives, financial situation or needs. You should consider whether this information is suitable for your objectives, financial situation and needs before acting on the information provided.