RBA hikes cash rate for eighth month: Here’s what to do
The last cash rate decision of the year has been made and it means more pain for borrowers.
Just weeks before Christmas the Reserve Bank of Australia (RBA) has increased the national cash rate yet again.
It's the eighth month in a row the board has agreed to lift the cash rate. This month it has risen by 25 basis points to 3.10%.
The move comes just a couple of weeks after RBA governor Philip Lowe apologised for assuring Australians there would be no rate rises until 2024. He made the comments throughout 2021 before inflation skyrocketed and the RBA had to start lifting the cash rate to combat it.
The good news is that there is never a cash rate meeting in January, which means there's a small reprieve for borrowers.
However, with today's decision, borrowers will be facing more mortgage pain. According to analysis from Finder, today's increase will add $82 a month on top of the average borrower's repayments. If that doesn't sound like a lot, borrowers are now facing $897 more each month compared to April before the rate rises began.
What can you do now?
Not all lenders respond the same way and some wait days or weeks to pass on any rate rises, but if you're worried about your repayments rising, here are some things you can do today:
Call your bank or lender
It may be able to refinance you onto a lower rate which will reduce your monthly repayments, or it may be able to assist you with a financial hardship plan. You might be able to switch to an interest-only home loan for 12–24 months or get a 6-month mortgage holiday.
Compare other home loan rates
Take a look at other interest rates on the market because you may be able to switch to a lower rate elsewhere. But check that it is worthwhile refinancing once you take into account other fees you may need to pay.
Look at your other expenses
If more of your money is going towards home loan repayments, look at where you might be able to cut back in other areas. Compare your internet, phone and mobile providers, as well as car and health insurance.
Go through your recent grocery receipts and see what you could have done without in your last shop and make sure to cut back on those items next time. Look at your bank statements too and make a note of all those one-off expenses that you didn't really need.
Save what you can in a high interest savings account
For many people, facing into rising mortgage repayments and the high cost of living might mean there's not a lot of room for saving money. But if you do have savings or you have the capacity to put some money away each month, make sure you're doing so in a high interest savings account.
As banks pass on interest rate rises for their home loans, they're also increasing the interest rates in their savings accounts. You should be looking at savings rates above 4% now.
Consolidate other debts
If you have any other debts, consider consolidating them into your home loan. This not only makes repayments easier to manage, but reduces your overall debts to increase your odds of approval if you want to refinance.