How to keep cheap when buying

You don’t have to be a real estate expert to know that property and rent prices are skyrocketing at the moment, with the latter area also experiencing plunging rental vacancies.

Then there’s our 15th consecutive month of 0.1% record low interest rates and an inflation rate of 3.5% over the year to December,  with the recently released trimmed mean figure of the last quarter at  2.6%, according to CoreLogic.

This highly interesting – to say the least! – situation has plenty of potential home-buyers wondering if they can afford even a shabby shack in Timbuktu.

Can I afford to buy a nice home?

We at Lending Loop have been pondering this question a lot lately but it was some recent words from Reserve Bank of Australia’s (RBA) governor, Dr Phillip Lowe, which made us think differently on this issue.

In an address to the National Press Club last Wednesday, Dr Lowe commented that most people were now choosing to live in “fabulous cities on the coast (and) we want large blocks of land”.

While these words didn’t impress a lot of people, Lending Loop saw it as a good chance to bring some positive hope to those disillusioned by current economic and real estate figures.

Basically, yes, living in a fabulous coastal city on a mega block of land – or even in a nice suburb with some greenery – may not be possible anymore.

But you don’t have to ditch your house dreams altogether because guess what?

Everything’s not lost

We suggest first-home buyers, experienced owner-occupiers and property investors all think outside the box when it comes to buying.

Be prepared to make some sacrifices and accept some imperfections to find that great property.

Here are our favourite unconventional and creative ways to beat today’s difficult economic figures:

1. Look for places near large parks, playgrounds etc

We’ve all seen those rather bland properties with little character or space to spare, if at all.

But look beyond the tiny bland and aim for a place within walking distance – or a short drive to – parks, sports fields, playgrounds, or walking and cycling trails.

For families, in particular, having spacious play areas nearby will make a big difference.

2. Tiny houses or townhouses

They’re all the rage now and it’s easy to see why: tiny houses cost far less than the average house and can enable you to live on a big block of land or even travel in style.

Another, similar but larger option, is to buy a townhouse with a courtyard or a small, private garden.

This way, you, your kids and your pets can still enjoy some outdoor space.

3. Move outwards

While not a new idea, moving to an outer suburb is a particularly pertinent plan for first-home buyers.

These suburbs may not be uber-rich and fashionable and living there may mean a longer commute to work.

But many many of these places are swiftly gentrifying and are often closer to regional and rural areas that make great places for you to visit on weekends and holidays.

Your outer suburb property doesn’t have to be your forever home either.

4.  Rentvesting

An increasingly popular idea, rentvesting effectively allows keen buyers with limited funds to enjoy the best of both worlds.

The concept means you can rent your current home for its preferred, yet expensive, location and lifestyle while buying an investment property in a cheaper suburb.

In this way you can live where you want to live, even though this means you’re still renting, while also enjoying the benefits of property investment.

Any profits from your investment can be used to pay your rent and the concept can also give you tax benefits.

Cheers to cheaper!

Wherever you are in the property race, we encourage you to be confident and go forth, particularly now that we’ve hopefully given you new ideas and encouragement to do so – and if nothing else but to defeat depressing figures!

We have plenty more great loan advice and tips to give you as well from refinancing to calculating your budget and more.

So, give us a call today at Lending Loop.

RBA remains unmoved by cash rate rumours

It seems slow and steady is still winning the race when it comes to the cash rate, with the Reserve Bank of Australia (RBA) announcing yesterday that the record low 0.1% figure was on hold for the 15th consecutive month. 

The central bank’s first cash rate announcement for 2022 comes on the back of plenty of rumours about when it will increase the record low rate.

But in his Monetary Policy Decision statement, RBA governor Dr Philip Lowe maintained patience was key to ensuring the best possible outcome for Australia’s economy.

Dr Lowe said while inflation had picked up faster than the RBA had expected, it still remained lower than in many other countries and was being affected by the recent COVID Omicron outbreaks, higher prices for petrol and newly constructed homes, and supply chain breakdowns.

“The headline CPI inflation rate is 3.5% (but) in underlying terms, inflation is 2.6%,” Dr Lowe explained.

“The central forecast is for underlying inflation to increase further in coming quarters to around 3¼ per cent, before declining to around 2¾ per cent over 2023 as supply-side problems are resolved and consumption patterns normalise.”

Dr Lowe reiterated that with all these points to consider, the RBA Board wasn’t prepared to increase the cash rate until actual inflation sat sustainably within its 2%-3% target range.

“While inflation has picked up, it is too early to conclude that it is sustainably within the target band,” he said.

Dr Lowe was pleased with the state of Australia’s labour market, which he said had recovered strongly, as well as the unemployment rate, which dropped to 4.2% in December. 

“The RBA’s central forecast is for the unemployment rate to fall to below 4% later in the year and to be around 3¾ per cent at the end of 2023,” he said.

Property experts cautiously positive 

The real estate industry is generally satisfied with the RBA’s first cash rate decision for 2022.

Dr Lowe admitted that while housing prices have risen strongly, the rate of increase has eased in some cities.

CoreLogic research director Tim Lawless concurred, explaining that while housing values continued to rise, the pace of this growth was gradually softening across most capital cities.

This is despite a small uptick in housing values last month when CoreLogic’s national measure of housing values rose by 1.1%.

While this figure was an increase of 10 basis points compared to December when the national index was up 1%, five of our eight capital cities recorded only a slight upward change to their monthly growth rate.

“Values are still broadly rising, but nowhere near as fast as they were in early 2021,” Mr Lawless said.

He pointed to the cost of new housing and higher rents as the key drivers of the higher core inflation reading over the December quarter.

However, this data was an indication of a stronger than forecast economic environment in 2022, he said, with the RBA itself acknowledging that key measures of the economy were performing better than expected.

We could see the RBA’s inflation and labour market mandates being met earlier than expected,” Mr Lawless explained.

He added that cash rates could still increase in 2022, despite the RBA’s insistence in December that this was unlikely to happen before 2023.

“A growing chorus of economic commentators are forecasting a rate rise later this year and financial markets have the first lift fully priced in by mid-year,” Mr Lawless said.

Even the chance that the cash rate may rise sooner than expected is a “downside risk to housing”, he said.

“Previous analysis from CoreLogic shows a strong inverse correlation between movements in the cash rate and housing values, albeit with the strongest correlation based on a lag,” he explained.

“But other factors are also likely to influence the trajectory of housing values.”

These factors include credit policy, which may tighten later this year, and housing affordability, Mr Lawless said.

“Also, although labour markets have tightened substantially, there is little evidence of a material flowthrough to wages growth,” he explained.

However, Mr Lawless added that several possibilities could help to offset a significant downturn in the property market as the result of a cash rate increase.

“As the economy strengthens and labour markets tighten, the risks around mortgage stress or default should lessen,” he explained.

“Open international borders will also help to support demand, initially from a rental perspective but in the longer term, for home purchasing as well.

“Additionally, housing inventory levels remain remarkably low across most jurisdictions which is adding some support for housing values.”

What’s next for mortgage holders?  

Firstly, with low interest rates potentially continuing well into 2022, there’s never been a better time to pay off your mortgage as swiftly as possible.

Alternatively, as Lending Loop recently recorded, you may want to consider refinancing your loan to achieve the best possible deal.

Also consider that even when the cash rate starts rising, changes to your mortgage won’t happen overnight with Mr Lawless explaining that it will take time for interest rates to normalise once they start rising.

This in turn will provide a low cost of housing credit for awhile.

Finally, remember that as we said at Christmas, no one has a crystal ball to ensure the future holds great things for you and your loan.

But we can give you great advice on what road to take with your loan in 2022.

Regardless of whether you’re a first-home buyer, property investor or someone struggling with a badly wobbling budget, rest assured, we’re your biggest supporter.

We won’t even insist you stop buying a morning coffee!

So give us a call today at Lending Loop.



Wheels in motion: RBA paves the way for early cash rate rise


As widely predicted, the RBA on Tuesday kept the official cash rate at the record low level of 0.1% for the 12th consecutive month.

But it was the wording in the RBA’s monthly statement that really caught the attention of pundits.

For the first time in a very long time, the key phrase “will not be met before 2024” was not included when referring to scenarios that needed to occur to trigger an official cash rate rise.

And in a later webinar speech, RBA Governor Philip Lowe said it’s now “plausible that a lift in the cash rate could be appropriate in 2023”.


This isn’t completely unexpected

For months, economists from financial institutions around the country have called on the RBA to revise their targets, with some predicting the cash rate rise could happen as early as November 2022, including Commonwealth Bank and AMP.

That’s right – possibly less than a year away.

Now, we understand this will be a nervy period for some mortgage holders, especially the younger ones.

After all, more than one million homeowners have never experienced an official cash rate rise (the last rise was back in November 2010).

So rest assured we’ve got your back – we’re here for you if you have any questions or concerns about what rising interest rates could mean for your mortgage.


So why is the cash rate rise (possibly) being brought forward?

The RBA’s statement sums it all up pretty neatly, but here’s the CliffsNotes version: as vaccination rates increase and restrictions are eased, the Australian economy is expected to recover relatively quickly from the interruption caused by the Delta outbreak.

“The Delta outbreak caused hours worked in Australia to fall sharply, but a bounce-back is now underway,” explains the RBA.

Now, the RBA says it will not increase the cash rate until actual inflation is sustainably within the 2-to-3% target range.

However, inflation has already picked up to 2.1%.

The RBA insists it’s in no rush though, saying it expects any further pick-up in underlying inflation to be gradual.

“This will require the labour market to be tight enough to generate wages growth that is materially higher than it is currently. This is likely to take some time,” the RBA statement says.

“The Board is prepared to be patient, with the central forecast being for underlying inflation to be no higher than 2.5% at the end of 2023 and for only a gradual increase in wages growth.”


What could a sooner than expected cash rate rise mean for you?

Well, the most obvious impact of a cash rate rise is that interest rates will go up, which means your home loan repayments might increase each month.

And that could have a flow-on effect for other parts of the economy, such as housing values, explains CoreLogic’s research director Tim Lawless.

“We are already seeing the rate of house price appreciation ease due to affordability pressures, rising stock levels and, as of November 1st, tighter credit conditions,” says Mr Lawless.

“Once interest rates start to lift, there is a strong chance that housing prices will head in the opposite direction soon after.”


So what can you do about it?

Well, that depends on your current financial situation.

If you’re a prospective first home buyer suffering from FOMO, or someone looking to upgrade over the next two years, don’t be disheartened by increasing property prices: now’s the time to start planning ahead.

Planning ahead involves understanding your borrowing capacity, your property goals, and your current expenditures – this can help you determine what changes you can make before you pull the trigger on a purchase.

On the other hand, if you’re a current mortgage holder, now could be a good time to reassess whether you should lock in a fixed interest rate.

Indeed, many lenders have recently increased the interest rates on their 2-, 3-, 4- and 5-year fixed-rate home loans to head off the cash rate rise, and this latest statement from the RBA could trigger more rate hikes.

So if you’ve been on the fence about fixing your rate, it’s definitely worth getting in touch with us sooner rather than later.

We can run you through a number of different options, including fixing your interest rate for two, three, four or five years, or just fixing a part of your mortgage (but not all of it).


Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.


Seismic shift: two major banks hike fixed interest rates


Do you know how when one tectonic plate shifts, others around it soon follow?

Well, in the past week, the Commonwealth Bank (CBA) and then Westpac hiked the interest rates on their 2-, 3-, 4- and 5-year fixed-rate home loans by 0.1% (for owner-occupiers paying principal and interest).

Meanwhile, ING also lifted its fixed rates on 2- to 5-year terms by 0.05% to 0.2%.

For mortgage-holders, it’s a clear ol’ rumbling sign that the days of super-low fixed interest rates are coming to an end.


So why are banks increasing fixed interest rates?

The Reserve Bank of Australia (RBA) has repeatedly insisted the official cash rate isn’t likely to rise until 2024 at the earliest.

But it seems the banks don’t believe them. The banks think it’ll happen sooner.

CBA, for example, is currently predicting the RBA will increase the official cash rate in May 2023, while Westpac is predicting a rate hike in March 2023 – both well before the RBA’s 2024 timeline.

Given that’s about 18 months away, the major banks are now adjusting the fixed rates on fixed terms of 2-years and longer, in order to head off the expected rise in their funding costs.

“Lenders are scrambling to lift fixed rates before they start to feel the margin squeeze,” explains Canstar finance expert Steve Mickenbecker.

“Borrowers shouldn’t be so complacent as they must expect rises inside two years, and the closer they get to that point, the less attractive the fixed rates alternative will be.

“They may want to consider fixing their interest rate for three years or longer, while the going is still good.”


Variable interest rates cut

Interestingly, a number of the banks – including CBA and ING – simultaneously slashed interest rates on some of their variable-rate home loans this week.

And CBA even cut their 1-year fixed rate by 0.1% (for owner-occupiers paying principal and interest).

So why did they do this when (longer-term) fixed rates are going up?

Well, aggressively competing for customers on variable-rate mortgages (and 1-year fixed) makes sense for lenders when a cash rate hike is predicted to be at least 18 months away.

They can always increase their variable rates when needed, but they can’t do the same for borrowers locked in on longer-term fixed-rate mortgages.


So what’s next?

As mentioned above, when the big banks make a move, it’s not uncommon for other lenders to follow suit – as seen with ING this week.

So if you’ve been on the fence about fixing your rate, it’s definitely worth getting in touch with us sooner rather than later.

We can run you through a number of different options, including fixing your interest rate for two, three, four or five years, or just fixing a part of your mortgage (but not all of it).

If you’d like to know more about this – or any other topics raised in this article – then please get in touch today.


Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Four key tips for helping you make the big home loan switch

There’s no better time than now to find a better deal on your home loan and we’ve observed the sharp rise in homeowners seeking to explore refinancing options since the beginning of the global pandemic.

And there’s good reason we’re seeing more and more mortgage holders seeking a better deal. With the total number of home loan customers who switched providers jumping by 27 per cent – from 143,664 in 2019 to 182,016 in 2020.

More than 200,000 Australian families are tipped to make the switch in 2021. But making the switch isn’t foolproof and there are common mistakes people make.

Laura Higgins, Senior Executive Leader Consumer Insights and Communication at ASIC, recently shared some important tips with ABC radio, which we’ve compiled for you below as well as some additional advice for good measure.


When it comes to the big banks and home loans, it’s often the case that customer loyalty goes largely unrewarded. RBA data tells us that for loans written four years ago, borrowers were charged an average of 40 basis points higher interest than new loans.

So on a loan balance of $250,000, the reality is that it could cost you an additional $1,000 in interest payments each year.

“Many times, new customers are offered a better deal than existing borrowers, so if you have a home loan that is a few years old you could potentially get a better deal that saves you thousands of dollars over time,” Ms Higgins explains.

“Even if you’re happy with your current lender, it’s worth checking you’re not paying for features or add-ons you’re not using.”


Cashback offers and super low interest rates are just two ways lenders are enticing new customers to make the switch, which means you need to do your homework first to ensure you’re truly getting the best deal.

Glittery incentives are designed to entice customers to switch mortgages quickly, but Ms Higgins urges borrowers to look closely and weigh up the long-term costs.

“For example, it’s worth doing the maths to ensure a cashback offer still puts you ahead over the long-term when considered against other aspects of the loan, like interest rates and fees. If you decide to switch lenders, you may end up with a longer-term loan,” she said.

It’s vital to check whether you’re up for any other costs such as Lenders Mortgage Insurance (LMI) or discharge and loan arrangement fees, which can sometimes outweigh the benefit of having a lower interest rate.

“A mortgage broker can also help you compare loans and decide whether to switch,” Ms Higgins adds. 


If you’ve been lucky enough to put some savings away and are now eyeing off low interest rates, perhaps it’s wise to try and pay off your mortgage sooner rather than later.

And as Ms Higgins notes, “Interest rates may be low now, but probably won’t be this low forever. Making some extra repayments now can benefit customers in the long term.”

But if you’re not quite in that position and are worried about tying up all your funds in your home loan, perhaps consider switching to a mortgage redraw facility or offset account, which can help you to make extra repayments but still withdraw them if you need to.

“Either of these options might work for you depending on your goals,” Ms Higgins adds.

“Not all home loans can be linked to an offset account, and often those that can may have a fee charged or a slightly higher interest rate, so it’s worth making sure you’d be saving enough in there to warrant any extra costs.”


One of the most common big questions we field relates to whether you should consider a fixed home loan rate or not, however it’s good to know there is another option available.

The good news is that you can also choose to fix the rate for a part of your mortgage, but not all of it. Doing this allows you to lock in a low rate for a portion of your home loan, while also taking advantage of some wriggle room a variable rate can offer, including being able to make extensive additional payments.


Now really is the time to get on top of your refinancing options and see how your loans can work for you, instead of you working for them – now and well into the future.  We would love to go over home loan refinancing options with you, whether that be renegotiating with your current lender or exploring your options elsewhere.

Bar raised for borrowers: tougher home loan serviceability tests

The Australian Prudential Regulation Authority (APRA) will increase the minimum interest rate buffer it expects banks to use when assessing the serviceability of home loan applications from 2.5% to 3% from the end of October.

This means that banks will have to test whether new borrowers would still be able to afford their mortgage repayments if home loan interest rates rose to be 3% above their current rate.

APRA estimates the 50 basis points increase in the buffer will reduce maximum borrowing capacity for the typical borrower by around 5%.

“The buffer provides an important contingency for rises in interest rates over the life of the loan, as well as for any unforeseen changes in a borrower’s income or expenses,” APRA Chair Wayne Byres wrote in a letter to the banks.


Why is APRA increasing the buffer?

This move doesn’t come out of the blue. Federal treasurer Josh Frydenberg flagged tougher lending standards a week prior following a meeting with the Council of Financial Regulators.

And it’s due to a combination of factors.

Firstly, interest rates are at record-low levels, and secondly, the cost of the typical Australian home has increased more than 18% over the past year – the fastest annual pace of growth since the late 1980s.

That combination has made financial regulators a little worried that some homebuyers are starting to stretch themselves too thin and borrow more debt than they can safely afford.

Mr Byres adds that 22% of loans approved in the June quarter were more than six times the borrowers’ annual income. That’s up from 16% a year prior.

As such, APRA did consider limiting high debt-to-income borrowing but believed it would be more operationally complex to deploy consistently.

“And it may lead to higher interest rates for some borrowers as lenders effectively seek to ration credit to this cohort,” APRA adds, but it doesn’t rule out limiting high debt-to-income borrowing in the future.


Which borrowers are most likely to be impacted?

The increase in the interest rate buffer will apply to all new borrowers.

However, the impact is likely to be greater for investors than owner-occupiers, according to APRA.

“This is because, on average, investors tend to borrow at higher levels of leverage and may have other existing debts (to which the buffer would also be applied),” APRA adds.

“On the other hand, first home buyers tend to be under-represented as a share of borrowers borrowing a high multiple of their income as they tend to be more constrained by the size of their deposit.”


What could this mean for your home loan borrowing hopes?

If you’re worried about how this latest announcement from APRA could impact your upcoming application for a home loan, then get in touch today.

We can apply APRA’s new loan serviceability tests to your personal circumstances to help you determine your borrowing capacity and focus your house hunting.


Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Is a home loan lending crackdown on the horizon?

Lending standards and fast-rising property prices have been hot topics of late.

Interest rates are at record-low levels, and the typical Australian home has seen its value increase more than 18% over the past year – the fastest annual pace of growth since the late 1980s.

It’s a recipe that’s making financial regulators a touch worried that some homebuyers are starting to stretch themselves too thin and borrow more debt than they can safely afford.

So federal treasurer Josh Frydenberg recently met with the Council of Financial Regulators – which includes APRA, ASIC, the Australian Treasury and the RBA – to discuss the state of the housing market.

“We must be mindful of the balance between credit and income growth to prevent the build-up of future risks in the financial system,” Mr Frydenberg said in a statement.

“Carefully targeted and timely adjustments are sometimes necessary. There is a range of tools available to APRA to deliver this outcome.”


What could this possible crackdown look like?

Here’s an interesting stat for you: almost 22% of Australians have a mortgage debt that’s more than six times higher than their annual income, according to the latest data from APRA.

That’s up from 16% just one year ago.

The fact APRA mentions that particular stat gives us a pretty good clue as to what one possible lending crackdown measure could be.

“Most analysts expect that this time, APRA will target debt-to-income ratios, probably by limiting the proportion of loans that can be made above six times an applicant’s household income,” explains the ABC.

It’s also worth noting that Mr Frydenberg and APRA are not the only ones to publicly indicate that change could be on the horizon – the RBA expressed similar concerns about the increase in housing prices and housing debt just days ago, too.

“Even though the banks have strong balance sheets and lending standards are being maintained, there is a risk that in this environment, households will become increasingly indebted,” RBA assistant governor Michele Bullock wrote.

“A high level of debt could pose risks to the economy in the event of a shock to household incomes or a sharp decline in housing prices. Whether or not there is need to consider macro-prudential tools to address these risks is something we are continually assessing.”


Want to know how a potential lending crackdown might affect you?

It’s worth reiterating that we still have very limited information available about what financial regulators have in mind for any potential lending crackdowns.

What we can do, however, is help you assess your potential debt-to-income ratio on any property purchase you currently have in mind. And we can also help you determine your borrowing capacity in the current lending landscape.

So if you’d like to find out more, get in touch today. We’d be more than happy to run you through it all in more detail according to your personal circumstances.


Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

The importance of being ready for interest rate hikes

How well prepared are you for a rise in interest rates? While that may seem like an odd prospect for many of us after 18 consecutive cash rate cuts from the RBA, we always need to be prepared.

And when the big banks start showing signs, it’s time to consider what that might look like for you in a practical, month-to-month sense.

What would an interest rate rise look like for you and how much extra would a new mortgage holder expect to pay each month? 


While the RBA’s official position has been that it doesn’t expect to lift the lid on the cash rate until 2024, and this month held the rate at 0.10 per cent, there’s healthy speculation that the next rise in rates could arrive as early as 2022.

Westpac and the Commonwealth Bank have earmarked the period between late 2022 and early 2023 as a likely time when rates may start to spring up, with the official cash rate predicted to hit 1.25 per cent in the third quarter of 2023 and peaking in 2024.

Meanwhile, NAB increased its two, three and four-year fixed rates by up to 0.10 per cent for owner-occupiers paying principal and interest.

Banks have the ability to increase fixed rates as a method of heading off potential RBA rate hikes. In overall terms, this means that the shorter the length of term of the fixed rate that is increased, the sooner a bank is expecting the next increase in rates will be.

Generally, the shorter the term of the fixed-rate that’s increased (ie. if two-year fixed rates are raised), the sooner a bank may predict the next rate hike will be. And with economists at the big banks seeing that future in their crystal balls, how should you be planning to make the most of it and how much extra money should you be factoring into your monthly mortgage repayments if the official cash rate starts to rise?


You’d have to cast your mind back to 2019 to find the last time that the RBA cash rate target was at 1.25 per cent. Although it wasn’t that long ago, it seems like a completely different world – before the global COVID pandemic appeared like an unwanted neighbour at a backyard barbeque.

So, just how much extra should the average mortgage holder expect to pay?

Modelling provided by Canstar showed that the average variable mortgage rate would jump from 3.21 to 4.36 per cent, based on the current gap between the two rates.

In plain English terms, this means that if you took out a $500,000 loan tomorrow, and the cash rate hit 1.25 per cent in 2024, the modelling estimates your monthly repayments would increase $300 to $2464 per month. Commonwealth Bank’s modelling covers a similar scenario, with repayments up $324 per month.

That’s despite shrinking your remaining loan balance to $468,770 after three years of repayments, and assuming the banks only add on the cash rate increase – and not any extra. On top of that, there’s also the possibility that even more waves of RBA cash rate increases could soon follow.

So if the average variable loan rate increased to 7.04 per cent in 2031, where it was not that long ago back in 2011, Canstar estimates that same borrower who took out a $500,000 loan would pay $900 more in monthly repayments than they do now, even after a full decade’s worth of repayments.


Every household is different, in unique situations and you can’t take a one-size fits all approach. Let us run you through your options and help you find the right mortgage option for you.

It may be difficult to imagine that interest rates could rise from the relaxed position of the current record low cash rate, however it’s vital to pay close attention. We had 18 cash rate reductions before the RBA increased the cash rate to 4.75 per cent back in November 2010.

It pays to look ahead, if you’re worried about what such a scenario could mean for you and your home budget in the coming years, get in touch with us today and we can run you through a number of options that include (but are not limited to) fixing your interest rate for two, three, four or five years, or just fixing part of your mortgage (but not all of it).

How you can simplify debt and save at the same time

If you’re like most Aussies, you’re probably paying off more than one loan.

Whether it be a mortgage, a car loan, a credit card, a personal loan – or even all four (gulp!) – keeping track of what needs to be paid and when can be difficult. 

If you add in changing interest rates and the need to make milestone purchases, you wouldn’t be the only one to find yourself, and your finances, under quite a bit of stress.

The good news is that you don’t have to don a clown suit and keep all of those loan repayments in the air, as there are solutions available to help you manage your money, and your repayments, better.

In a nutshell it’s called debt consolidation, and it has the power to take the pressure off your finances.

Debt consolidation essentially means rolling all of your existing loans into one easy-to-manage loan. Let’s take a look at some of your options:


One of the most common ways to consolidate debt is to take out a new personal loan and use that to pay off your existing debts.

Importantly, the interest rate on your new personal loan must be lower than the rate on your existing debts, such as a credit card with a 17.99% interest rate. 

This will mean you pay less interest each month and you can either use the funds you save on other things or put the money back into paying the loan principal so that you pay off what you owe faster (and save more interest again!)

Another benefit is avoiding costly late payment fees many credit cards have and with just one loan to keep track of, you’ll be able to budget a lot easier and have a clearer picture of when you’ll be debt-free.


Another option is to refinance your home loan to consolidate your debts, including car loans and credit cards, into your mortgage.

Mortgages offer comparatively low interest rates, so consolidating your loans in this way will reduce your monthly repayments and cut down the time and energy spent on managing multiple loans. 

It’s important to note, however, that while this option can help ease the pressure on your finances now by reducing monthly repayments, consolidating your debt through your mortgage can extend the term of your loan, which may have previously been much shorter.

This means unless you aim to make a lot of extra repayments as soon as possible, you may wind up paying a lot more interest than you bargained for.

One way to address this is to create a loan split for the debt consolidation, which enables you to pay off short-term debts within a few years, rather than over the existing long-term home loan period, which is usually 25 or 30 years.

With mortgage rates down due to the RBA’s official cash rate being at record low levels, it’s a good time to see how you can consolidate and take back control of your debt.

That’s where we come in:

Get in touch with us today to find out how we can help you explore your debt consolidation and refinancing options. We’re here to make the whole process as simple and cost effective as possible.

At present, lenders are providing mortgage holders impacted by COVID-19 with a range of hardship support measures, including loan deferrals on a month-by-month basis.

Whatever your circumstances, we’re here to support you however we can through these times.

Why refinancing your home loan makes sense and saves dollars

It’s no secret that many Australian households are going through tough times against the backdrop of a global pandemic, challenging economic conditions and a rapidly rising housing market.

However, it’s not all doom and gloom – you can relieve some strain on your family budget by reducing the cost of monthly mortgage repayments and Aussies across the nation are jumping aboard this trend.

Aggressive competition among lenders and an all-time low RBA (Reserve Bank of Australia) cash rate of 0.1 per cent, following six rate cuts in three years, have all been strong drivers alongside record low interest rates.

According to the Australian Bureau of Statistics (ABS), refinanced home loans recorded an all-time high of $17.2 billion in July, a jump of 6 per cent compared to June and more than double the value of refinanced homes in July 2019.

Katherine Keenan, Head of Finance and Wealth at ABS, noted borrowers were taking advantage of the shift with the surge likely to continue as lockdowns due to COVID-19 put even more pressure on homeowners.

“Borrowers are seeking out lower interest rates, particularly for fixed-rate loans and cashback deals across a large number of major and non-major lenders,” she said.

The good news is homeowners are in a powerful position, with plenty of competition among lenders offering record-low home loan rates.

According to comparison website RateCity, the number of variable rates under 2 per cent on its database climbed from 28 to 46 in just two months.

This competition for your mortgage means homeowners can pick and choose the best loan, and even negotiate with their existing lender to get a better deal.

The ABS reports borrowers are also opting to lock in their interest rate, too, following news that lenders have begun to increase the rates on 3-5 year fixed-rate loans.


One of the most common ways homeowners can get themselves a better deal is refinancing through their existing lender. 

What many don’t know is that lenders won’t automatically gift wrap and hand you their cheapest rate. 

Just as you have to negotiate with your phone or electricity provider for an updated plan, you need to ask your lender to cut your home loan rate.

If you’re not someone who is keen on negotiating, never fear, that’s where we come in. 

We understand that refinancing isn’t a one-size-fits-all solution and we can help you get the best deal and put dollars back in your pocket, not the lender’s.

Turning to an expert for guidance can also help you analyse whether fixed-rate loans or cashback deals would suit your situation.

They may look appealing on the surface, but if you dig a little deeper, you may find that your position calls for a more considered approach.

We can help you work through the fine print, fees and limitations that might exist within these loan options to help you determine whether a fixed, variable or split loan is better suited to your needs.

Get in touch with us today to find out how we can help you save thousands of dollars in interest repayments on your mortgage.