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Author: Michelle Hutchison

What a rate rise means for homeowners

It hasn’t happened yet, but if the latest Reserve Bank survey is anything to go by – now is the time to prepare. All 28 leading experts surveyed in what is now the largest RBA cash rate survey in Australia, have correctly predicted that the cash rate was to remain on hold for the month of October. 

Not only this, but it’s clear that a rate rise is not far off.

According to Scott Morgan, CEO of the Greater Building Society, certain risks are providing scope for a rate rise inside the next six months.

“... The RBA is cognisant to a potential build-up in asset prices and the flow-on risks that causes. There is scope for rate increases inside the next six months supported by these risks, the likely upward moves in US rates which will continue to cause a reduction in the Australian dollar and improving economic indicators in the Australian Economy around GDP, unemployment and retail sales,” he said.

So with six months on the rate change clock, what should homeowners be doing when it comes to reviewing their home loan?

Save for an emergency fund

Since it’s not a question of ‘if’, but of ‘when’, having a bit of spare money to rely on when the cash rate increases could help ease the burden. Even if you’re locked into a fixed rate, by starting the fund now you could have a significant amount of money saved when your fixed rate period ends. This could prepare you for the additional costs of refinancing or for a rate increase.

If your loan has the option of an offset account then you could essentially save money while saving money. Any balance in your offset account reduces the amount off your principal, meaning you only pay interest on the reduced amount.

Consider fixing

Locking in a competitive fixed rate before the rate rise hits can help you take advantage of the current conditions for an extended period of time. Fixed rate home loans have advantages other than locking in your rate, which sets your repayments for a certain period of time. This type of loan commonly offers the ability to make additional repayments, offset accounts and redraw facilities, although they may have limitations – all helping you save money and pay off your loan sooner. 

What now for homeowners?

It’s one of the busiest times of the year right now for both borrowers and lenders. Springtime generally sees buying, selling and refinancing numbers increase, so lenders are ready to offer deals and borrowers should be ready to take them. 

With a rate hike looming, now is a better time than any to review your home loan and see if you could be getting a better deal – whether that’s through a better rate, lower fees, or even through a lucrative home loan deal.

Michelle Hutchison 

Michelle Hutchison is the money expert for, one of the biggest online comparison networks in Australia

Fixed or Variable - which is right for you?