by Jye Smith
After writing about rising costs and interest rates in September 2022, it feels like everything is costing even more and that household cashflow is now even more strapped.
The Reserve Bank of Australia (RBA) put the cash rate on hold in April and we also saw a reduction in the inflation figure. This has been welcomed by many of my clients, friends and family.
The Impact Of Rising Rates
Since May 2022, the RBA has increased the cash rate from a record low of .10% to 3.6%, which is an increase of 3.5%. This is a ‘lever’ that the RBA pulls primarily to slow the rapid increase in house prices and reduce the inflation figure to a target of between 2 and 3% (though currently it’s at 6.8% – could this be a sign that it’s not working?)
The table below shows the effect of the total 3.50% rate increase during this time on different loan amounts:
| Loan Amount | Rate Increase since May | Increase in Repayments |
| $500,000 | 3.50% | $991 per month. |
| $800,000 | 3.50% | $1,582 per month. |
| $1,000,000 | 3.50% | $1,982 per month. |
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* Based on a 30 year principal and interest loan.
The Potential Impact Of Refinancing
We have been refinancing clients and saving them up to 1% on their current mortgage rates, as well as assisting those who are coming off a low fixed rate. Most of these fixed rates are due to expire by November this year and sometimes see over a 4% increase upon expiry.
The table below shows how much you could save in repayments if you were paying too much on your home loan, as well as what you may be up for if you have a fixed rate expiring:
| Loan Amount | .05% too much | 1% too much | 3% increase at fixed expiry |
| $500,000 | $155 per month | $314 per month | $836 per month |
| $800,000 | $247 per month | $501 per month | $1,388 per month |
| $1,000,000 | $310 per month | $628 per month | $1,672 per month |
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* Based on a 30 year principal and interest loan.
A Loan Health Check – It’s Worth A Look
For example:
- You may have been with a lender for some time and not looked for a better rate and therefore can be paying a higher rate than many others in the marketplace – we call this loyalty tax in the industry
- With the rapid rate increases, you may be struggling to stay on top of your home loan in conjunction with other personal commitments like credit cards, by now pay later facilities, or personal/car loans
- Your low fixed-rate home loan might be about to expire and revert to a rate that is 3% higher than you have been enjoying.
There are however options out there to help, and it’s the best part of my job – being able to help clients create wealth through property purchases and assisting in times of need.
Through a loan health check, we can help with:
- Refinancing to a better rate and loan solution
- Helping to consolidate personal loans
- Repricing your loans with your current lender
- Pre-approvals for a property purchase and more
- Restructuring home loan debt.
Example: Over $7,000 p.a. Saved + $4,000 Cash Back
Here is an example of clients we have helped with debt consolidation and refinancing recently.
Some young clients came to us who started on a 2.2% fixed rate 2 years ago, and during this time they had taken out a personal loan for a car and spent the limit on their credit card.
When their fixed rate expired, the rate went up to 5.25%, their mortgage repayments increased from $2,000 to $2,700 per month, and they were struggling to meet repayments on the home loan, personal loan and credit card.
The personal loan was $500 per month, and credit card repayments were $200 per month – this was only meeting the interest repayments and the card balance was not reducing. Overall, they had a total of $3,400 per month just in loan repayments.
The solution was to refinance their home loan debt to a better rate and cash out $50,000 on their home to pay out the personal loan and credit card.
The new home loan repayment was now $2,790 per month and with the other debts paid out, reducing their repayment commitment by $610 per month – this lender also gave $4,000 cash back to the client for refinancing.
How We Can Help
At Lambourne Partners, we have a dedicated Finance broking division that can sit down with you to understand your goals, needs, and aspirations to help you ease these pressures, buy a property, or discuss anything else finance-related. Whatever your situation, our Finance team will take care of all the bank dealings to help you get ahead in these tougher times.
Our service is at no charge to you, and we can meet face to face or by video at a time that suits you. To get in touch, contact us below or call (02) 4969 6600. We would love to see what we can do to help you.
