BEAT FUTURE RATE RISES

As consumer confidence continues to fall in the face of increasing concerns over future rate rises, Corey Michelmore from Michelmore Ollwitz First National Real Estate advises home owners to plan now to avoid unnecessary stress and the potential of losing the family home.

While the Reserve Bank has held interest rates for the time being, further rate rises in 2010 are inevitable, along with the strong possibility that living costs will also go up,” Corey Michelmore said.

“Which is why we are suggesting people take a good look at the household budget and start factoring in how they will meet these challenges in the coming year.

“Even a 1 per cent increase in interest rates, which is expected by the end of 2010, will translate to extra repayments of $193 per month on a $300,000 home loan, which may force many homeowners to default on their mortgages and lose much of the value they have built up in their homes.

But there are some simple steps we advise homeowners should consider when planning for these future interest rate rises.”

Minimise the home loan balance Pay off as much as you can over and above the minimum monthly repayments. There are a number of ways this can be done, including making fortnightly rather than monthly repayments; putting any additional cash into the mortgage (e.g. live off the amount of last year’s wages and put any wage increases into the home loan), chart spending and expenses and any surplus achieved as a result should go into the mortgage.

Consider refinancing There are often better deals to be found in a competitive market and even a small reduction in the home loan rate can significantly reduce the mortgage over the long term. Even if you do not refinance, make sure the valuation on your home is up to date and reflects recent price increases.

Prepare a budget Draw up a budget, clearly outlining all your expenses and spending and factor in rates 2 per cent above the actual current level.

Consolidate debt Put all debts under the one umbrella – the housing loan. Home loan rates are often much lower than those of credit cards or car and personal loans.

“Your home is not just your major asset, it is also where you live, so it is important that it does not cause you stress,” Corey Michelmore said.

Issued by: First National Real Estate

For further information, please contact Corey Michelmore, Principal from Michelmore Ollwitz First National Real Estate, on 8323 8099