Interest rates are on the rise, and it’s expected that they will continue to do so for the foreseeable future. With the OCR tipped to peak around 2.6%, it’s likely that interest rates will continue to rise significantly to the point where current homeowners need to be prepared.
Unfortunately, it’s anyone guess as to how high they may rise, however it’s certain that interest repayments will continue on an upward trend in 2022 and into 2023 and 2024.
So what can current homeowners do to prepare for this rise? And how will this effect those wanting to buy?
First up, those who are wanting to buy won’t be affected quite as much, as they will enter the market on the higher rates. Since banks are already assessing people on a slightly higher interest rate than what’s offered (called a test rate), the slight rise in interest rates likely won’t have too much effect on new borrowers at this stage.
For those already with a home loan, now is the time to get prepared. Work out how much your repayments could go up by, either weekly or monthly, based on a few percent higher than your current rate. This gives you time to prepare for how much you can expect your repayments to rise by, and gives you time to find the extra money.
It’s also a good time to look at reducing any unnecessary spending, and do a bit of a financial audit to free up any money that could in-turn go towards your loan. A few things we recommend are:
Cancelling any unused subscriptions or apps
Checking over insurance policies to ensure you are still getting the best deal
Checking with places like power and phone companies, etc to ensure you are still on the right plan for your circumstances.
And of course, make sure you check in with your mortgage advisor to ensure you are still receiving the right finance for your individual situation. Circumstances often change, so it’s a good idea to do a mortgage health check every so often to ensure you are on the right terms and best interest rates. Even if you took out your loan yourself through a bank, we can help with this - just get in touch.