As inflation ticks up, the Reserve Bank of Australia may lift official rates,and mortgage rates often follow. But with the right strategy, you can protect your borrowing power and keep your property goals on track. Here’s how.
Understand the Inflation-Rate Connection
Inflation erodes purchasing power, prompting higher rates to cool the economy. For borrowers, that means
- Higher mortgage repayments.
- Reduced borrowing capacity.
Review Your Loan Structure
- Fix or float? A fixed-rate portion offers certainty when rates climb; a variable portion lets you benefit if rates fall.
- Split loans Combine fixed and variable to balance stability and flexibility.
- Offset accounts Link your savings to reduce interest on the variable portion.
Boost Your Borrowing Capacity
- Consolidate debts Combine credit cards and personal loans into one at a lower rate.
- Refinance for better terms Seek lenders offering discounted rates or cashback incentives.
- Increase your deposit Even an extra 5% can improve your LVR and borrowing capacity.
Lock in Competitive Deals
- Rate-lock features Some lenders allow a temporary lock on rates before settlement.
- Loan discounts Negotiate for an ongoing rate discount or fee waiver.
Plan for Rate Rises
- Stress test your budget Ensure you can handle a 2%–3% rate increase on top of the current rate.
- Build a buffer Maintain an emergency fund equal to 3–6 months of repayments.
- Review annually Regular check-ins let you refinance or adjust your loan before rates bite.
Seek Expert Advice
Inflation and rate movements can be complex. At The Loan Office, our Portfolio Finance Strategists
- Analyse your budget and long-term goals.
- Recommend optimal loan structures to manage rate risk.
- Keep you informed about market trends and rate forecasts.
Feeling the squeeze? Contact us for a rate review and protect your borrowing power, so inflation doesn’t derail your property dreams.