The good news is, you got this. Your bank made sure of it.
When you apply for a loan, most banks stress test your ability to repay that loan if interest rates were to rise by 2 or even 3 per cent, explains Property Investment Professionals of Australia (PIPA) chair Nicola McDougall in a recent chat with Smart Property Investment.
It’s in your bank’s interest to make sure you can afford the loan.
That’s not to say some household budgeting might need reshuffling, and we get it, that can take some getting used to.
But how far will rates continue to increase? Again, Ms McDougall looks to the banks’ crystal balls.
“…most major banks appear to be pricing in a maximum interest rate of around 5 per cent to 6 per cent within two years, which is still relatively low compared to historical averages,” she said.
If you are feeling mortgage strain, the best thing to do is address it early. Shop around for a cheaper loan, recut the budget, or talk to your bank about support during temporary financial challenges like job losses or illnesses.
And if you are thinking of downsizing your mortgage, make the decision while you’re still in a good financial position and you’ll have the benefit of choice on your side.
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Thinking of making a move? Talk to us about selling.