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Interest Rates
Six Simple Solutions To Beat Interest Rate Rises
Interest RatesThe latest interest rate rises are expected to cost the average Australian home owner an extra $50 per month. Some home owners will take this opportunity to fix or split their loan, or look to refinance to another type of home loan. Speak to your financial broker to find out if these options could work for you.
In the meantime, if you're worrying about how you can afford to cover that extra $50 in your home loan repayments, here are six simple ways to make up the money:
Quit smoking
If you're still smoking, here's another good reason to quit. You could save a bundle and put the extra money towards your mortgage repayments. Not to mention the multitude of health benefits you'll enjoy.
What Does An Interest Rate Rise Mean To You?
Interest RatesHave you ever wondered how the Reserve Bank of Australia set the official interest rate? It's not a random decision made by a bunch of suits with a barrel of numbers, but it is based on the cash rate, which is the interest rate on overnight loans in the market. The interest rate moves up and down all the time and this movement is a marker of the economy as it needs to adjust to keep up with inflation and deflation.
The media are always analysing and predicting the next interest rate rise, but have you really given some thought to what a rate rise could mean to you?
Who's Afraid of the RBA?
Interest RatesYou probably hear the name on the radio or TV news almost every day, but how much do you understand about the role of the Reserve Bank of Australia? Known as the RBA, Australia's central bank plays a key role in the economy of our country, and on a personal level affects how much how are paying for your home loan interest.
So what do you need to know? Let's start with some of the basics.
In 1911, the Commonwealth Bank of Australia was established as a central bank. It was restructured to become the Reserve Bank of Australia in 1959, with the aim of holding onto central banking functions while the commercial and savings functions were shifted to a new organisation still known today as the Commonwealth Bank of Australia.
Could an Offset Account Make Your Money Work?
Interest RatesIf you're sick of working for your money, maybe it's time to get your money working for you with a mortgage offset account. This is an account linked to a mortgage account so that the interest earned on savings is used to minimise the interest on the mortgage.
How? Well, let's say you have a $200,000 home loan, and your monthly income is $2000. With an offset account, your salary is linked directly into your mortgage account. So instead of owing interest on $200,000, once you have been paid into your offset account, you will owe interest on only $198,000.
Beware Those Hidden Fees!
Interest RatesWith interest rates attracting so much glare from the political and media spotlights, it's hardly surprising that our thoughts tend to focus on that all-important percentage figure when we start planning our mortgage or remortgage.
But in truth, the rate at which we repay our borrowings is only one number in a matrix of fees and establishment costs which can have a huge impact on what we actually end up paying.
For sure, the comparison rate - or annualised average percentage rate (AAPR) is an 'effective interest rate' that takes into account several ancillary charges, and makes comparison of loans easier.
Would You Sleep More Soundly with Fixed Rates?
Interest RatesIf you are you worried about interest rates rising, there's no need to lose sleep over it. Find out if a fixed interest rate would work for you. A fixed interest rate is locked in for a particular term, usually from one to five years. This means that while the monthly repayments for those with variable rates will fluctuate according to interest rate changes, a fixed interest rate will not change for the term of the fixed period.
The security of knowing the exact amount of repayments is a big advantage to many home owners, as it means they can budget precisely and understand their cash flow for 3 to 5 years in advance. A fixed interest rate is ideal for home owners who like to know exactly what their repayments will be or those who worry about rates rising.
Weighing Up Comparison Rates
Interest RatesA comparison rate is determined when the cost of interest payments and fees is combined into one rate to give borrowers an idea of the total annual cost of a loan. This rate is also known as the average annual percentage rate (AAPR).
Since 2003, all Australian lenders have been required to provide a comparison rate as a point of reference for borrowers when advertising home and personal loans.
