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Tips on how to deal with interest rate rises

Nov 07, 2022

‘Location, location, location.’ For many, it’s the adage of the new homebuyer. Now with interest rates on the rise, it’s ‘review, review, review’. That’s why we sat down and spoke to the experts at Bank of Queensland for their top tips. By simply reviewing your current accounts, features and habits, you could discover opportunities to make savings and minimise the impact of rate increases.

From your money to your memberships, take a moment to review these 🕵🏼‍♀️:

Your existing home loan 

Why spend more than you have to? Don’t set and forget your home loan – review and renegotiate it.

On a variable rate loan? Consider a fixed rate to give you certainty of what your repayments will be for a set period into the future. Just be sure to plan for potential rate rises towards the end of this period.

Already on a fixed rate? Get in touch with your home loan provider before your fixed term ends to talk through your options, like locking in a new rate or switching to a competitive variable rate. A repayment calculator could help you work out the best option for you.

Like the benefits of both? You could even look at splitting your home loan into fixed and variable portions so you get some certainty, together with some flexibility to take advantage when the market is favourable.

Your transaction account 🧾

Is your everyday transaction account linked to your home loan? If not, you’re missing out on the simplest way to save on the interest you pay.

An offset links a transaction account to your home loan, and uses the money in the account to ‘offset’ your loan balance. That means rather than paying interest on the full amount owed, you’ll only pay interest on the difference.

The more money you keep in your offset account, the less interest you’ll pay. So by having your salary paid into your offset, you’ll automatically reduce the interest you pay on your home loan. Plus, you’ll still have access to available funds to make everyday transactions.

Your repayments 💰

Adjusting the way you make repayments could also help you save on interest.

Make extra repayments when you can. It’ll give you a buffer if interest rates rise down the track, and cut years off your home loan. Got a tax refund or work bonus? Put it into your mortgage and you could save thousands in interest. Use an extra repayment calculator to see the difference.


You could also consider a redraw facility on a variable rate home loan. This allows you to make additional repayments, and have the flexibility to withdraw from the extra money you added if you need to. Just remember any withdrawals you make means your loan balance (and interest rates) will increase again.

Your savings 🏦

Rising interest rates might not be great news for home loans, but it’s good news for savings accounts. Look at putting some funds into a high interest savings account, and you’ll earn more interest on your savings when interest rates go up.

Make a quick win by choosing an account without a monthly fee. Plus, treat this strictly as a ‘savings’ (not a ‘transaction’) account and avoid making withdrawals. The more money you keep in the account, the more interest you’ll earn.

Your credit cards 💳

Credit cards can be both helpful and a hindrance when you’re paying off a home loan.

Help: Using your credit card for everyday expenses, like bills or even coffees, means you can keep as much money in your offset account as possible. Because the interest in an offset account is calculated daily, the more money you keep in it day-to-day, the less interest you’ll pay.

Just make sure you pay off the full balance of your credit card on the due date each month, so you can save on interest there too.

Hindrance: Don’t overstretch yourself by spending more than you can repay on your credit card. Consider paying down outstanding debts sooner where possible. Consolidate them into one loan to give you more control of your cashflow. And check out low rate credit cards to ensure you’re not paying any more than you need to.

Your budget 👛

Don’t have one? It’s time to create one. Budgeting is often the top tip given by anyone who’s saved for a property, or paid one off.

If you’ve had a budget in place for a while, now’s the perfect time to review it. With the rise in interest rates and inflation, use a budget planner to consider your increased expenses, see where you can cut down and find opportunities to make extra savings and plan for future rate rises. 

Your energy provider ⚡️

Loyalty is rarely rewarded when it comes to energy providers. Often, the only way to save on your plan is to switch providers – or at least threaten to! With power joining the price hike, shopping around could secure you a far better deal.

Government rebates, credits or concessions are available in every Australian state and territory, if you look for them.

Your subscriptions 👩🏼‍💻

Streaming and music services can seem like small treats, with their low monthly fees and easy cancellation policies. But how many have you taken up – and cancelled?

If you’re not getting the most out of services like these or memberships like the gym, consider the cost per session, episode or song. You might be surprised at the amounts you’re paying, and savings you could be making.

Your options 👉🏻

If you’re considering changing your loan type or features, talk to your lender about your options so you’re clear on the short and long term impact of any changes. 

And if you’re experiencing financial hardship as a result of interest rate rises or other reasons, get in touch to discuss your circumstances. They may have options available to change, postpone or reduce your repayments to see you through a difficult period.

 

At BOQ, we’re here to help if you need support to meet your financial obligations, or just want to talk to us about getting the most out of your finances.

 

Bank of Queensland Limited ABN 32 009 656 740 (BOQ) AFSL and Australian Credit Licence No 244616. This article is for general information purposes only and is not intended as professional advice. It does not take into account your objectives, financial situation or needs. You should consider the appropriateness of any advice before acting on it. You should seek your own independent financial, legal and taxation advice before making any decision in relation to the material in this article. Read the T&Cs to consider if these product/s are right for you.

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