Interest Rate Rises

Have you ever wondered what an interest rate rise means for you and your finances? Below is a fact sheet that contains answers to any questions you might have about an interest rate rise, and how it might impact you.

How does an interest rate rise work?

Commercial banks will have to pay a higher rate of interest on their short-term loans, an increased cost which they can then pass on to their consumers.

What does this mean for me?

Basically, the rise means that it will be more expensive to borrow money from a bank. This translates to higher interest rates for mortgages in Australia. This may sound scary, but it aims to combat inflation by reducing spending to slow down our economy.

I’m worried about how this will affect my mortgage.

When you apply for a mortgage, the bank will access your ability to make repayments based on a higher interest rate, to account for any changes which may occur during the term of your loan.

An increase in the cash rate by the RBA together with the current rate of inflation means that many of us will need to adjust our household budgets to accommodate the changes.

How could this affect my monthly repayments?

We’ve crunched the numbers here to give you an idea of how you may be impacted.

In the hypothetical examples below, we have calculated what an interest rate rise would mean to your monthly repayments.

 
 What are my options for managing rate increases?

If you are worried about interest rate rises, you should ensure that you have a buffer in your budget to manage any increases. You could also consider locking in your mortgage at current rates. If you are eligible to refinance your mortgage and find a lower rate, this may also be the time to do so.

If you would like to discuss how an interest rate could impact you, contact the team at Provide Finance today.