The effects of interest rates on the property market
The rise and fall of the interest rate has a knock-on effect in every sector that feeds into the economy. As a homeowner, you will experience a significant change in home loan repayments depending. To ensure you stay on top of your finances, follow our tips to futureproof your budget.
Manage your monetary expectations
The rate at which banks and private lending institutions loan money often increases throughout the financial year. Anyone who has a mortgage is automatically indebted to pay this sum back with interest. The higher the interest rate climbs, the more your monthly repayments will come to at the end of every month. You can plan ahead for unexpected increases by accounting for them in your budget each month. It is wise to always live below your means, in order to be prepared for a rainy day or financial emergency. Having a solid savings plan can help you avoid the pitfalls that come with rising interest rates and safeguard you from falling behind on your monthly repayments.
Try to free yourself from other debts
Having multiple repayments that all increase at the same rate could wreak havoc on your finances. Work out a financially savvy plan that sees you paying off your smaller loans quicker. This enables you to work toward being debt-free and allows you to allocate more funds toward paying off your bigger loans such as your mortgage. Another reason to do this is to increase and improve your credit score. Having a reliable credit rating will hold you in good stead when applying for future loans.
Seek the best rate for you
Buying a home or investing in any kind of property is a long-term investment. It makes sense to embark upon this journey with the perfect fit when it comes to interest rates. Although the interest rate is set to increase at a standard level across the board, different lenders and institutions can still set their own basis rates. This makes some options cheaper than others. Shop around to find one that offers the lowest rate over the shortest period of time. Your main bank or "home bank" should be able to offer you a competitive rate as they want to retain you as a client and keep your business in-house. Never forget, that banks and private lending institutions want to capitalise on home loans and will try to offer you good deals.
Keep track of your money
Following a strict budget for household expenses, leisure and entertainment allowances, monthly essentials and more will work wonders for monitoring your cash flow. A high number of individuals and families are one emergency away from being plunged into a financial crisis. By smartly navigating the money flowing in and out of your account, you can have some sense of stability. Have allocated funds set aside for medical expenses and once-off emergencies that will not affect your home loan repayments. With wise money management, you can comfortably move into a top-notch housing development of your choice.
Create a secondary source of income
Gone are the days when households could depend solely on one income. Nowadays, multiple streams of income are often a necessity. One way you can introduce extra money into your account without spending time on another job or side hustle is by investing in interest-earning securities. This generates a passive income, making it easier to repay your loans each month and providing extra cash flow to other areas of your life. The socio-economic benefits of creating a second income are tenfold and can be the most effective way to combat overwhelming interest rates in the long run.
Aska Property Group offers listings of affordable, exclusive properties for you to choose from. Contact one of our trusted property practitioners and begin searching for your dream home in one of our brand-new developments on the Western Seaboard, or invest in plots of land to begin laying the foundation for an architectural masterpiece.
15 Nov 2023
Author Aska Property Group