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Interest only rate rises – What can you do?

With the recent increases in interest only rates, Blackburne Mortgage Broking share four ways you can avoid the rate hike!

1. Pay principal and interest instead!

There can be advantages in reverting your loan to principal and interest (“P&I”) if your interest only loan now is attached to a higher interest rate than you would like.

P&I loans are now generally cheaper than their interest only loan counterparts, with banks now encouraging mortgage holders to pay down their debt.

In opting for a P&I repayment, depending on your loan balance, your repayments increase but the payoff is that you will see the loan balance reduce and your equity position grow.

This option may not be suitable for everyone so we recommend you seek independent advice from your accountant.

2. Fix it

There are still many great fixed rates available and we are seeing many clients exploring this avenue to snag a cheaper loan.

Historically the fixed rate loan has not been as popular due to their limitations, however in recent years banks have made them more flexible and “user friendly” than they once were.

There is also the option of splitting a loan facility into both a fixed and variable loan.

This is a great way to hedge your bets and get the benefits of both products.

Your Blackburne Mortgage Broker can run through the pros and cons of fixing so you can make an informed decision as to whether or not this is a viable option for you.

3. Seek additional pricing

If you have not had your loan reviewed in the last couple of years, then now is the time to do so.

Particularly if your loan is more than a few years old, there may be scope to obtain additional interest rate discounts from the lender direct.

On your behalf, your Blackburne Mortgage Broker may be able to squeeze more of a discount out of your lender.

This is done on a case by case basis, depending on your current rate and total aggregate borrowing but is often the first port of call when a client is looking to save more on their home loan.

4. Look at other lenders

If you feel that your bank is not giving you the love and attention you deserve then there is always the option of looking at what other lenders are offering.

Not only could there be sharper rates elsewhere but many lenders are also offering incentives to seduce clients into giving them their business.

Even if you find out that your bank’s offering sits pretty well in the current market you will at least have the peace of mind that you have the best product and structure for your current circumstance.

What to do next?

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Take control of your finances and start paying less on your mortgage today. With our no cost, no obligation review of your existing loan, our expert mortgage brokers will analyse your current loan and provide you with a tailored solution to help you save on interest and pay your loan off quicker.

Paul Prindiville


0438 196 695