Repayments are one of the biggest concerns facing mortgage holders. Indeed, one of the first questions people might ask when buying their first home, upgrading or looking into investment properties is 'how much will my loan repayments be?'
While a number of factors affect the price of loan repayments, analysts in the industry say that those costs are on the rise. Fortunately, there are a number of ways Australians can prepare for any increase in their mortgage repayments.
Increasing rates, prepared Australians
According to Canstar, interest rates for 20 institutions have risen to anywhere from 3.85 to 6.11 per cent.
A comforting factor when considering repayments has been the Reserve Bank of Australia's (RBA) cash rate, which has remained steady at 2 per cent since May 2015. That, however, does not mean payments will stay the same as well. Lenders can increase mortgage rates independently of the RBA.
According to analysts at Canstar, 20 financial institutions have recently raised mortgage rates despite the RBA cash rate remaining unchanged. Interest rates at these institutions now sit between 3.85 per cent on the low end and 6.11 per cent on top.
Fortunately, a significant majority of Australian mortgage holders are prepared to weather these increases, thanks to a built-up savings buffer. According to Deloitte's Australian Mortgage Report 2016, approximately 75 per cent of borrowers have enough savings to withstand a rate hike – about one-third have a strong enough buffer to last more than 12 months.
How to build that buffer
While many Australians will face little difficulty with a potential mortgage increase, it is still a good idea to build up savings. Putting money aside may seem tough at times, but there are a number of ways to save without the stress.
Electric and water bills make up a significant portion of Australians' household expenses. According to data gathered by Numbeo, utilities make up 6.2 per cent of monthly expenditures, just under $200 a month on average.
Measures to conserve water and cut down energy use can have a big impact. Even little things – such as taking shorter showers, using low-flow fixtures or turning off a TV or computer when not in use – can result in significant savings.
Another key way to save is by being aware of certain fees and penalties. Many banks have certain stipulations that can lead to charges. Make sure you follow these, as well as any similar requirements for credit cards. Organisation and planning can go a long way towards avoiding costly penalty charges.
For more information about affordable loans and unique mortgage solutions, contact Mortgageport today.