The Effect Of Rising Interest Rates In Australia
Australia has seen 9 interest rate increases since April 2022 to assist in taming inflation and this has had a major impact on household budgets. The Reserve Bank has just recently raised its cash rate by 25 basis points to 3.35%.
The rise in interest rates have made it more difficult for people to keep up with their loan payments, especially for those with large mortgages. With each increase, the cost of borrowing has gone up, putting a strain on many families' finances.
For example, a loan of $500,000 including all the interest rate increases individuals would incur an extra $1,000 per month in interest, or $12,000 per annum. This is a significant amount of money, especially for those who are already struggling to make ends meet. The extra cost can cause many people to dip into their savings or cut back on other expenses, which can have a ripple effect on the economy as a whole.
Here are a few steps you can take to reduce the burden of rising interest rates:
- Pay down debt: High-interest debt, such as credit card debt, can become even more expensive as interest rates rise. By paying down debt, individuals can reduce their monthly payments and save money in the long run.
- Approach a your bank and ask them if you can have their introductory rate for new customers. If they don't give you this rate, let them know that you'll be switching to another bank . As they won't want to loose you, they might just reduce your rate. . This can help reduce your monthly payments and save you money over the life of the loan.
- Build an emergency fund: Having a solid emergency fund can help you weather unexpected expenses and prevent you from relying on high-interest credit card debt in times of financial stress.
- Consider fixed-rate loans: If you're in the market for a loan, consider opting for a fixed-rate loan instead of a variable-rate loan. This can help you avoid the negative impact of rising interest rates.
- Review your investments: Rising interest rates can also have an impact on your investments. Review your portfolio and consider reallocating your assets to minimize the impact of rising interest rates.
Cut expenses: Finally, look for ways to cut expenses and reduce your overall debt. This can include reducing discretionary spending,
consolidating debts, or finding ways to increase your income.
In conclusion, rising interest rates in Australia are having a significant impact on household budgets, but there are ways to mitigate the effects to ensure that you can stay on top of your borrowings.
To ensure you can stay on top of your financial obligations , Arrange a chat with one of our expert team members.
The information is general in nature and is not personal advice. It does not take into account your needs, objectives or financial situation. You should seek independent advice suitable to your circumstances.