More interest rate rises expected

First, the good news.

Westpac is forecasting that the Reserve Bank of Australia will cut the country’s official interest rate seven times in 2024 and 2025. 

But before that can happen, Westpac chief economist Bill Evans believes the RBA will raise the cash rate to a peak of 4.10% in May (it’s currently 3.35%), up from its previous predicted high of 3.85%.  

Westpac’s revision comes after the central bank adopted a more hawkish approach at February’s monetary policy meeting, following stronger-than-expected inflation figures over the December quarter.

With inflation proving stickier than previously thought, recently released minutes show the RBA’s board discussed increasing the cash rate by either 50 basis points or 25 basis points, before warning that “further increases in interest rates” were likely in the months ahead. 

If Westpac’s forecast comes to pass, the average existing owner-occupier with a $500,000 variable-rate mortgage with 25 years remaining could see their repayments rise to $3,489 in May, up from $2,335 in April 2022, according to RateCity calculations.

Is it a good time to fix your interest rate?

Understandably, you might be considering fixing your home loan interest rate, given that many are anticipating multiple rate rises.

But while a fixed-rate home loan will give you certainty that your repayments won’t unexpectedly rise, it’s generally a mistake to try to ‘beat’ the market. That’s because lenders will have already priced in additional cash rate increases to their fixed-rate products. 

You should also keep in mind that, if rates were to fall again in the future, you wouldn’t benefit until your fixed-rate period expires. As such, it’s important to weigh up the pros and cons of fixing your mortgage so you can work out if it’s the right move for your unique circumstances.

As an award-winning mortgage broker in Sydney, Eventus Financial can help you with this.

What to do if you are struggling with repayments

It’s an increasingly challenging time for some borrowers, with higher home loan rates coming hand-in-hand with cost of living pressures.

So what are your options if you are experiencing financial difficulties and can no longer afford your mortgage?

Well, the first thing you should do is contact your lender as you may be able to renegotiate the terms of your loan. For example, you may be able to switch to an interest-only loan or a longer loan term.

But while both of these options will reduce your monthly repayments, keep in mind that they will lead to you paying more in interest over the life of your loan.

Looking for an award-winning mortgage broker in Sydney? Eventus Financial has over 350 five-star Google reviews and a very strong reputation. Schedule a no-obligation consultation with Alex to find out how we can help you.