When interest rates are rising, household budgets can be left in tatters. What options do you have to beat rising rates? Plenty! Here are seven simple strategies to help you restructure your mortgage repayments – and keep your finances in tip-top shape.
1. Get to know the numbers.
To kick things off, let’s work out how much your home loan repayments will change with each rate rise. No one can say for sure how high rates will continue to move, but it pays to be prepared, right?
Our nifty table below shows how much extra you may need to fork out each month on a variable rate loan across a range of possible rate rises.
If your home loan is worth say, $500,000, and rates rise from 4% to 4.25% p.a, that could see your monthly repayments increase by $68 each month. Further along the scale, an increase to 4.5% p.a could add an extra $136 to your monthly repayments.
To find out how your loan repayments could change if rates rise, head to our loan repayment calculator. It lets you play around with the numbers so you can plan ahead.
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Possible rise in monthly repayments* – various rate rises
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Value of your home loan
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If rates rise 0.25% p.a
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If rates rise 0.5% p.a
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$400,000
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$54
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$109
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$500,000
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$68
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$136
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$600,000
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$81
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$163
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Source: ME’s Compare our Home Loans Calculator
[1]
*Based on remaining loan term of 25 years, with principal and interest payments
2. Restructure your home loan.
There is a smorgasbord of options when it comes to restructuring your home loan. These include simple and complex changes, like:
• paying the minimum repayment amount
• recasting your loan, meaning extending the loan term or recalculating the balance
• switching to an interest only loan.
With any change to your loan, there are factors to consider. Short-term budget relief may result in paying more interest over time. ME is here to help – so make sure you contact us to discuss your specific situation.
3. Become a budget boss.
If you’re not already budgeting, there’s no better time than now to make a start. A budget helps you track spending, shows where you can cut back, and lets you monitor regular savings. What’s not to love?
Try a budgeting app like Frollo, MoneyBrilliant or Pocketbook, and have your budget in your pocket wherever you go. Or head to our Budget Planner and we’ll crunch the numbers for you.
4. Spark up savings on power.
Interest rates aren’t the only thing rising. Power prices are heating up too[2] – time to check if you could get a better deal. If you’ve been with the same provider or plan for a few years, there’s a good chance you could save by switching.
To know for sure, dust off your latest power bill and head to Energy Made Easy. Plug in a few details about your current provider and household power use, and the site will show how much you could pay with other providers.
5. Rethink grocery shopping.
Groceries can take a big bite out of household budgets. If that sounds like you, switching supermarkets or buying seasonal produce at the market can mean big savings. Rising interest rates spurred MEbank customer Chris F to go easy on home delivery food apps –trying his hand at cooking new cuisines instead. ‘I’d fallen into the habit of ordering a lot of home delivered meals, and the cost was really starting to add up,’ says Chris.
‘I signed up for emails showing the latest supermarket specials, so I compare prices, buy whatever’s discounted, and then check out free recipes online to try something new. I’m easily saving $80 a week.’
Visit The Feed for more household money tips.
6. Scratch unwanted subscriptions.
ME research found that Aussies could be saving up to $570 a year on unused subscriptions. From gym subscriptions to streaming, it’s a fair bet you’re paying for services you’re not getting maximum value from. Whether it’s that free trial that went on a little too long, or that third music streaming app that you just can’t let go of, it’s time to unleash your inner Marie Kondo and get decluttering.
7. Get in touch with ME.
It can take just one major life event to fall behind on your finances. Get in touch early to see how we can help. If you’ve lost your job, suffered an illness or injury, or are just struggling with making ends meet, we want to help you manage your financial position. Explore ME’s Hardship Assistance Policy, or speak to the team at ME:
1300 500 520 Monday to Friday 8:30am – 5pm, or after hours on 13 15 63.
Rising interest rates means it’s game-on to get on top of money matters. Plan ahead and let the savings stack up with a few smart steps. It can help you come out on top even when rates are climbing higher.
Manage rate rises with ME.
Get tips, tools, and support to manage your home loan as rates rise.
Learn more
[1] https://www.mebank.com.au/home-loans/compare-calculator
[2] https://newsroom.unsw.edu.au/news/business-law/energy-crisis-why-are-electricity-prices-set-rise
This article is prepared based on general information. It does not take into account individual financial objectives or needs and is not financial product advice.