What to do When Interest Rates Are Low

  • Posted 12 Feb

What to do When Interest Rates Are Low

Interest rates are pretty low across Australia right now, and they have been for a good five months, making the mortgage market quite competitive.

It looks like the cash rate is set to stay low over the next year, which means that any low interest rate you’ve locked in on your home loan was a good move.

If you haven’t taken advantage of these low interest rates, now might be the best time to capitalise on it and review your own mortgage…



#1: Review your rate


Now is the best time to review your current home loan terms and look at the benefits of fixing your rate right now.

This is a solid strategy for ensuring your monthly payments are within your budget and also allows you to plan ahead as well, because you know exactly what you’re budget commitments are.

If you’re not comfortable locking in your entire loan, because you’re planning to do some renovations later in the year, then consider splitting your home loan, so that you have a portion on fixed and a portion on variable.

Chatting to your mortgage broker about this option is the best way to ensure you get the split right.



#2: Increase repayments


Low interest rates = savings. If you’re smart, you’ll take those savings and put them right back into your mortgage by increasing your repayment amount.

This is a smart move, because it not only reduces the interest you’ll pay over the life of the loan, it also helps to protect you against any future rate rises.

This is a good option if you’re currently childless but are planning a family in near future.

There are many options to make extra repayments; this will largely depend on the terms of your home loan, so make sure you chat with your lender before you increase repayments to ensure you’re not going to be penalised for doing so.



#3: Pay more often


Another strategy to consider on top of extra repayments is to simply increase the amount of payments.

For example, if you’re currently paying monthly, consider switching to fortnightly repayments.

By doing this, you’re effectively doubling your efforts to reduce interest over the life of your loan.

If you are considering this option, it’s also a good idea to consider opening a redraw facility so that you can access funds from the extra repayments you’ve made in case an emergency arises.

This provides you with a bit more flexibility while also making the most of savings you’re receiving from lower interest rates. Win:win.

Is it time you reviewed your current mortgage? Are you taking advantage of the low interest rates? Not sure what you can do to decrease your interest? Chat with our team at Australian Credit and Finance today. We’ll help you figure out what your next move is.

FREE Property Report
Get a estimated valuation range recent local sales
Detailed property information and more...
We will email your report to you
Get your report