Mitigating Risk in a Rising Interest Rate Environment
15 September 09There has been much speculation in recent weeks around interest rates. It is widely accepted that rates will increase in the next 12 months or so with some economists predicting one or two increases before Christmas. With current rates at near 50 year lows it was always going to be a question of when not if rates increase again, but that doesn't make it any easier to accept!
With that in mind, what are some real & practical things you can do to help cope with the extra burden? Having a strategy in place can assist you in dealing with further rate rise. It's best to be prepared. We've come up with a number of ideas that can help you cope with the changes.
1. Budgeting is the first step in maintaining the week-to-week health of your wallet. You may want to have breakfast at home rather than grabbing something on your way to work, packing your lunch from home or perhaps cut back on the DVD rental. Start assessing your expenses and cut back on those that you will hardly miss.
2. If expenses begin to exceed your comfort level, you may wish to consider refinancing your existing debts.
3. Another strategy to cope with rising rates is to consolidate all your debt into your mortgage so you are paying a much lower rate. However you need to be disciplined in making repayments otherwise you run the risk of turning short-term debt into long-term debt.
4. Fix your rate. The risk of this is that if you were to fix your mortgage you might find yourself locked into a higher interest rate. Sometimes sticking with a variable rate may be better for you in the long run.
For a review of your situation and determine how an interest rate increase would change your monthly or fortnightly payments, speak to me today. I can also give you more information on these ideas and assist you in finding and planning a financial situation that is relevant to your personal circumstances.
Regards,
Jason Fong
Finance Manager
Australian Finance Professionals
Member of Australian Loan Company Ltd
