MJJ Accounting and Business Solutions

Your Trusted Advisor, Melanie Jacobson and the team at MJJ Accounting and Business Solutions

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April 8, 2018 By Mel

Interest Rate Hikes are Coming – Are You Prepared?

After many years of record low interest rates (yes, it’s not normal to have mortgage rates under 4%). We are starting to see upward pressure on interest rates around the world and we are now seeing speculation that Australia will join the raising of interest rates.

So how will this affect your mortgage?

How much extra will you need to find each month on a principal and interest loan? On an average mortgage of $500,000 rising interest rates do not really start to have huge impact until they have risen by 1%. See the below table for an example of these increases:

Impact of interest rates rising on a principal and interest loan of $500,000

Interest rate Monthly repayment Extra repayments per month Extra repayments per year
3.75%                                        $2,570.66                                                            –                                                        –
4%                                        $2,639.18                                                    $68.52                                            $822.24
4.75%                                        $2,850.59                                                  $279.93                                        $3,359.16

It may be time to think about earning extra income or reorganising your finances to prepare for any interest rate rises in the future.

We are a small business accounting service located on the beautiful Sunshine Coast and would appreciate the opportunity to help you, your friends, family and colleagues. Contact us on 07 5451 1118 for obligation-free confidential discussions today.

Filed Under: Wealth Creation & Strategy

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