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Are Interest Rates Going Up?

The rising number of mortgages combined with historically low interest rates mean banks are busier now than ever.

Is now the time to break your mortgage and refix, could you be saving $100’s a month?

Have you got enough reserves in your budget to weather any future storm?

Most people think that breaking a mortgage and paying a break fee is in the too hard basket, this is simply not true. Your mortgage is normally your biggest out going so if you could save $100’s would you?

The likelihood of interest rates rising by more than about 1.5 percentage points in the next three years looked fairly limited, but if rates shifted from 2.3 per cent to 4.3 per cent it could mean fortnightly hikes of $150 to $300 for homeowners.

The same can be said in reverse, many people are still paying interest rates in the 3%’s and just waiting for the rate to expire. Really you need to be proactive and look at what options you have.

Most banks are offering a refinancing package to cover some of the costs associated with switching banks, such as legal fees.

When was the last time you did a Mortgage Health Check?

Last week's Monetary Policy Statement from the Reserve Bank suggested a rise in interest rates might be closer than many expect.

It isn't the only central bank making such noises, so borrowers and investors would be wise to take note.

Unsurprisingly, the Reserve Bank struck an upbeat tone when talking about the economy. Dairy prices are close to a seven-year high, unemployment has proved to be much lower than expected, business confidence has rebounded, and the housing market remains very buoyant.

With that more optimistic outlook in mind, it's hard to argue we need to keep monetary policy and interest rate settings at emergency levels indefinitely. The Reserve Bank appears to agree.

Its forecasts suggest the Official Cash Rate (OCR) will start rising from its current 0.25 per cent in the second half of 2022, and that it will be back at 1.50 per cent by the end of the following year.

That is still extremely low compared to history but compared to current levels it's a substantial increase.

Top tips when you are refinancing:

• Shop around for the best rates, not all banks are offering the same rates • Find out what refinancing will cost • Calculate whether it is worth it (We can do this for you) • Compare your options with your broker • If you're able to keep your repayments the same or even higher, refinancing at a lower rate will enable you to pay off your home faster with less interest overall

When was the last time you did a Mortgage Health Check?

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