Making the Most of Your Variable Interest Rate

Making the Most of Your Variable Interest Rate

The Reserve Bank of Australia (RBA) is announcing another increase to the cash rate in August, and many experts expect the cash rate to reach at least 2.60% by November 2022..

What does this mean for you?

If your mortgage is on a variable interest rate or is shifting to one sometime in the future, any efforts you make now will have returns down the track. Speaking to your financial expert of choice should be your first step.

Variable interest rates on your mortgage

If you currently have a variable interest rate, you will see an increase in your monthly repayments.

If you have the capacity to make additional repayments now, while your rates are still relatively low, you can ease the burden down the road.

Additional payments onto your variable rate home loan are paid directly against your principal amount. Your regular minimum repayments, especially early in your loan period, are predominantly paid towards the interest.

This compounding effect of reducing the principal amount can significantly affect the term length of your home loan.

What does this mean for your repayments?

According to the Australian Bureau of Statistics (ABS), the average owner-occupier home loan in South Australia was $463,127.

Over a 30-year loan period and the current variable interest rate of 4.61%, our calculators put repayments at:
$2,376.96 per month, or $548.16 per week.

Looking toward next year, if the cash rate rises to 3.35%, as some experts are predicting, what do your $463 000 home loan repayments look like?

With the same conditions and a variable interest rate of 6.11%, you’re looking at repayments of:

$2,809.52 per month, or $647.91 per week.

That’s an increase of $432.56 each month.

So, how can you make the most of your variable interest rate?

Speaking to your mortgage broker or financial expert of choice should be your first step. They know the current market, what offers the lenders currently have available and the different options available to you. They are best placed to guide you on what your next move should be, whether that’s refinancing, increasing your current repayments or something else.

You can use our calculators to determine the difference between your current rate and your future predicted rate. Then use our extra repayment calculator to see what your loan will look like by making those extra repayments now.

Take responsibility for your financial future

If you can manage to pay the increased rates going into the following year, tightening your budget now can give you more financial freedom when you need it later.

If you’re looking to ease the burden of rising interest rates, look at the calculators available on our website and book a session to talk about your variable rate home loan.