Homeowners survive RBA cash rate decision, but is it enough?
41% of home loan borrowers struggled to pay their mortgage in July. When will they see relief?
After a lot of speculation about what the RBA could do with the cash rate this month, it ended up doing nothing. The cash rate stayed on hold at 4.35% - which means variable home loan interest rates are also set to stay where they are. Hooray!
A few weeks ago there had been talk of the RBA increasing the cash rate, thanks to worrying inflation figures. In fact, 1 in 5 of the economists that Finder surveys ahead of the RBA had said they thought the cash rate would increase.
But in good news for already-struggling homeowners, we now know that didn't happen.
While better than the alternative, this cash rate hold is more good enough news than good news though.
According to Finder's Consumer Sentiment Tracker, 41% of mortgage holders struggled to pay their mortgage in July.
An increase to their home loan repayments could have pushed them to breaking point. So while a hold is welcome news, it's not as welcome as a rate cut would have been.
We survived a rate increase this time, but what about next time?
The good news is that most of Finder's panel of economists believe there will be a rate cut in the next 12 months. A quarter of them even believe it will happen by the end of this year.
Homeowners potentially have a few more months to hold on, but we should be cautious. Back in February we were talking about the likelihood of a rate cut as early as now or September. Inflation proved a little stickier than hoped though, and those hopes of a rate cut have been pushed farther and farther back.
While a rate cut would be good news for anyone with a home loan, those who have been taking advantage of high savings rates will be worse off. Interest rates on savings accounts at the moment are topping out at around 5.50%.
Steps to take if you're struggling to pay your home loan
If you're struggling to repay your home loan, there are steps you can take:
Take stock of what you're spending.
As a very first step, crawl through your bank statements and see what you're spending money on. If there's anything you can cut out of your spending or if there are any bills you can shop around for other deals to save money on. This won't fix anything, but it's a good place to start.
Compare other home loan rates.
Take a look around at other home loan interest rates to see how your own rate compares. If you find rates lower than what you're already paying, that information is useful.
Found a lower rate? Call your lender.
Once you've looked at other rates on the market, you need to call your lender. If you've found lower rates, tell them and see if they can move you onto a lower rate. If they can't, it might be time to think about refinancing.
Can't see lower rates? Call your lender.
If you've looked around and you think you're on one of the lowest rates in the market already and you really are struggling with your repayments, you might need to ask about hardship plans. It's still worth calling your lender to see if they can put you on a lower interest rate - you never know! If they can't, you should explain to them you're struggling. They will talk you through options like repayment pauses or temporary interest-only payments.
If your lender can't help, consider refinancing
If your lender isn't lowering your interest rate, or it's not lowering it enough compared to what's out there, it could be time to refinance. There are other costs to consider though, so it would need to be feasible for you. Read through our pros and cons here.
If you're unable to lower your home loan interest rate and refinancing isn't an option for you, you might need to call the National Debt Helpline on 1800 007 007.
