Borrowers concerned about servicing future interest rate increases should pick up the phone and talk to their lender, rather than let their situation get out of control or rush to switch institutions, Resi Mortgage Corporation said today.

 

The Reserve Bank of Australia meets on Tuesday to review official interest rates, and it is predicted the official cash rate will rise for the 12^th time in a row.

 

Resi’s Head of Consumer Advocacy, Lisa Montgomery, says it’s clear these rate rises are beginning to be felt by many borrowers who are now also being forced to curb their spending. She says borrowers feeling the pinch should not ignore their situation.

 

“A conversation with your lender can not only assist you through this current climate but also arm you with financial strategies which could improve your overall situation,” says Ms Montgomery. “Part of the service offered by your lender is exploring all available options - it’s what they do every day.”

 

Ms Montgomery says a person’s circumstances can change many times, for many reasons, within the life of a loan, and loan conditions can be changed to reflect this.

 

“With so much product innovation in the market, it is likely there will be new products or options which are appropriate to them that have emerged since they initially signed their loan,” she says.

 

Some of the options worth exploring before switching institutions - and absorbing the costs and hassles associated with such a move – include:

 

-         Interest only repayments. By switching to interest only repayments you temporarily reduce your ongoing commitments.

-         Switching to a fixed rate. Fixed rate terms protect borrowers from interest rate fluctuations and set your repayment schedule for a fixed term. You can consider fixing only part of your loan.

-         Change repayment frequency. Halving your monthly repayment and paying it fortnightly results in more repayments each year, reducing the term of your loan and the interest you pay.

-         Loan Program Conversion. If you did not provide your full financials at the time of your loan application, you may be eligible for a reduction to your interest rate by providing updated financial information.

-         Extension of Loan Length. By extending the length of your loan, repayments are spread over a greater period, resulting in a reduction in repayment amounts.

Ms Montgomery says if after all of your investigations, you are still not happy with your current lender, then perhaps your future does lie with another loan provider. However, she warns that before you make such a significant decision, do your research and look before you leap.

If you would like to speak to one of Resi's lending & Mortgage Specialist then click here.