Press Release - How To Deal With The Latest Interest Rate Rise
by Lisa Montgomery 8/08/2007
How To Deal With The Latest Interest Rate Rise - Borrowers Forced to Look Beyond Tax Cuts
Leading non-bank lender, Resi Mortgage Corporation, says many borrowers will need to look beyond the latest round of tax cuts to fund today’s official interest rate rise announced by the Reserve Bank of Australia (RBA).
Resi’s Head of Consumer Advocacy, Lisa Montgomery, says some people have offset recent rate rises through federal government tax cuts. However she says today’s 0.25 per cent increase in interest rates would necessitate some additional belt tightening and, for some, tough changes to family spending.
“Until now tax cuts have gone some way to providing relief for many borrowers, but this latest interest rate increase may take a lot of people by surprise and into new territory when it comes to funding it,” says Ms Montgomery.
She says today’s increase will mean borrowers with a mortgage of $270,000 will have to find around $47 extra per month to add to their current home loan repayment. (See table below).
“Nobody likes a rise in interest rates and this increase was an unexpected one for a lot of borrowers,” says Ms Montgomery. “Tax cuts effective from July 1 this year will partly compensate, however, there may still be a shortfall for some borrowers who will have to choose which area of spending they will cut to cover the rest.”
Ms Montgomery says borrowers looking for additional ways to cover increased repayments should carry out an honest appraisal of their current financial landscape.
Montgomery offers the following suggestions to borrowers who may be feeling the pinch:
- Look at consolidating high interest consumer debt into lower interest loans
- Consider fixing the interest rate on all or part of your home loan
- Review the features and benefits of your current home loan arrangement
She says this latest increase will be sobering for many borrowers who are highly geared.
“If you are feeling pressure from this rise, completing a stocktake on your personal financial situation can often unearth opportunities to re-allocate your disposable income. Sometimes simple actions can provide effective solutions.”
INCREASE IN MONTHLY REPAYMENTS BASED .25% RISE IN RATE
|
Loan
Amount
|
Current Repayment
at 8.07%
|
New Repayment
at 8.32%
|
Monthly Increase
|
|
$270,000
|
$1,994.36
|
$2,041.72
|
$47.36
|
|
$370,000
|
$2,733.01
|
$2,797.92
|
$64.91
|
|
$470,000
|
$3,471.66
|
$3,554.11
|
$82.45
|
(Please note that these principal & interest repayment calculations are monthly over a 30 year term and are based on the current bank standard variable interest rate of 8.07%)