The Reserve Bank of Australia (RBA) has announced its third rate increase for the year, a move that will hit so many Australians through higher repayments and increased pressure on cash flow.

The news will be unsettling, but it’s worth stepping back to consider the broader context. Interest rate cycles are part of the economic landscape. Periods of rising rates are typically followed by stabilisation, and eventually, easing.

In fact, despite the recent upward movement, current rates remain broadly aligned with long-term averages. The historically low rates of recent years were, by all accounts, an outlier.

 

That said, the reality of increased repayments is tough. Rather than attempting to anticipate what’s next, a good approach is to ensure your lending strategy is clear, flexible, and aligned with your personal goals. 

 

Five strategies to stay ahead of rising rates

 

1. Reassess your loan

Over time, home loans can become less competitive. Lenders rarely prioritise repricing for existing clients, which means there may be opportunities to as for a rate reduction or refinance with another lender. A strategic review, not just a rate comparison, can identify whether refinancing could deliver meaningful long-term savings or improved flexibility.

 

2. Is it time to talk fixed vs. variable rates?

In a rising rate environment, some people will want certainty. While fixed rates are currently higher than variable, they may still appeal to you if you’re after predictability in your cash flow. Alternatively, a split loan structure can provide a balance, locking in a portion of your loan while retaining flexibility on the remainder. The right mix will depend on your risk tolerance and forward outlook. 

 

3. Reassess your repayments 

If you can stretch, increasing repayments, even modestly, can materially reduce interest over the life of the loan. Additionally, moving to more frequent repayments can accelerate principal reduction. These small changes often have a compounding benefit over time.

 

4. Make the most of your offset

An offset account can be your best friend. By holding extra cash in your offset, you effectively reduce the balance on which interest is calculated. Building and maintaining cash reserves in this way can also provide a buffer against future rate movements.

 

5. Review your broader loans and debt structure

For borrowers with more complex arrangements such as multiple properties, investment lending, or additional credit facilities, it’s important to ensure your structure remains fit for purpose. This may involve consolidating debt, separating owner-occupied and investment debt, or aligning your lending strategy with tax and investment considerations.

 

Let’s chat strategy

 

Navigating rate movements is less about reacting to headlines and more about maintaining a well-considered strategy. Having the right structure in place, and revisiting it regularly, can significantly reduce the impact of external changes.

The Napoleon Finance team are here to support you with ongoing advice, market insights, and strategic guidance as life changes.

If you’d like to chat about how the latest RBA decision affects you, reach out to one of the team today.