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To most people the recent rate rise has probably not come as a shock. Virtually all analysts were predicting that the rate rise occurring on Melbourne Cup day was a sure thing. Now that we have had 3 increases this year and 8 consecutive increases what is next for rates and how do you combat the effects of the recent increases?
Fix Your Rate One way to combat future increases in interest rates is to fix your loans. A fixed loan means that you fix your interest rate for a term of generally 1, 2, 3, 4 or 5 years. While your interest rate is fixed it will remain at the fixed rate no matter what is happening to the market variable rates. However as we have recently seen 3 increases in the last year is it now to late to fix? Will fixing mean that you fix at a higher rate for the next few years? Not necessarily. Even though rates have increased 3 times this year analysts are saying that another increase in February 2007 is still possible. So with another increase a possibility and some banks and lenders not yet adjusting their interest rates from the previous increase if you hurry there are still some good fixed rate bargains in the marketplace. However one thing you need to be sure to do is apply for a rate lock on application. This means that from the time you apply your rate is locked in. Some banks offer this while others do not and some charge for it while others will offer it free. Citibank currently has a free rate lock on their 3 year fixed interest rate of 7.12%pa (CR7.73%). If you are interested in fixing your loans enquire online all call our office on 1300 733 281. Consolidate Other Debts With interest rates increasing if you have a variable rate loan your repayments increase with the rate rise. These increases in repayments can lead to financial stress. One way to reduce the burden of the rate rise is to consolidate all of your debts into a lower interest rate loan. This can eliminate high interest debts that are affecting your cashflow and means that you now only have one easy repayment to worry about. As an example if you have a home loan, car loan, and a couple of credit cards your situation may be as follows: Home loan $240,000 at 7.30%pa repaying $1646 per month
Car loan $23,000 at 9.10%pa repaying $479 per month
Credit card 1 $5,000 at 16.5%pa repaying $125 per month
Credit card 2 $4500 at 18.5%pa repaying $115 per month
Total Monthly Repayments $2365 By consolidating all of the above debts into one loan with an interest rate of 7.12%pa your situation would be as follows: New Home Loan $276,000 at 7.12%pa repaying $1858 per month
Total Monthly Saving $507 This is just one example of how consolidating your debts can reduce your monthly commitments making things much easier in an increasing interest environment. If you would like some solutions to consolidate other debts enquire online or call our office on 1300 733 281. |
