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Book a FREE consultation
and receive your complimentary eBook

Get started with a free strategy consultation and receive a copy of the Good Fortune Guide – written by James McFall, Managing Director Yield FP and 2020 National Finalist Certified Financial Planner of the Year to help educate you on your Financial Plan.

Mortgage Rate Increase Due To Covid-19

mortgage
Mortgage Broking Not all debt is bad. But being sure that your debt is structured in a way that is helping your financial goals is why regular reviews are key to success to managing your debt costs.

Mortgage rate increase due to Covid-19 are being considered for 2021.

Banks and lenders are now establishing how they will recoup from the cost of the pandemic, as found by a Finder.com report. This is despite the Reserve Bank keeping interest rates at a historic low of 0.25% for its sixth consecutive month.

Announcements made by the government on 25th September 2020, should make it easier for homeowners or those looking to enter the property market to get a mortgage. Increased regulatory obligations placed on lenders following the GFC saw an attitude of “lender beware” which in turn led to more in-depth scrutiny by lenders prior to providing customers access to credit.

The proposed changes will instead place a greater emphasis on customers providing accurate information to credit providers during the loan application process. These changes, widely welcomed by the industry, seek to improve access to credit as the Australian economy recovers from the impact of the COVID-19 pandemic. If passed by parliament, the changes will come into effect in March 2021.

These developments are showing how mortgage rates are dependent on many factors. The global economy and banks dealing with financially strained customers this year have both influenced the market.

Anticipating and adapting to developments in the industry is at the core of financial planning. Understanding how various strategies can be best tailored to your needs is the question everyone with a mortgage should be considering right now.

One purpose of your financial plan should be to keep more of your money in your pocket. Having a strategy around your debt structure and reviewing it annually so it is always fit for purpose is a corner piece of the financial planning puzzle. This could lead to a far better position than what your original mortgage offered.

Cost of the Pandemic on the Banks

There are a variety of factors that could make home-loan lenders increase their benchmark rate. This has resulted from the rise in the cost of business for the banks. The pandemic has meant home-loan deferrals and a shrinking first-home buyer market have created a major loss in cash flow.

Banks are now assessing how they will recover from this with a return to normal economic activity still out of sight. This means now is an appealing time to reassess your own mortgage to see if it is a strong foundation for your overall financial structure.


Fitting Your Mortgage and a Mortgage Rate Increase Into Your Financial Plan

You can look at your mortgage as a puzzle piece to your overall financial plan. It is an integral part of your overall goals, but components such as interest rates and how long your repayment period is could greatly affect your goals and when you reach them.

Getting your debt in control could lead to a range of possibilities for you, your financial plan, and your life. Reorganising your debt so you can see how it will be paid over the years, whilst still factoring in repayment increases, can put you on track for a successful transition to retirement.

Mortgages and even a mortgage rate increase are something that nearly everyone deals with, but regularly reviewing yours so it is structured in a way that works with your goals is something a financial planner can provide and we excel at it at Yield – Financial Planner Melbourne. This can keep more of your money for the things that you want to do.

A mortgage rate increase is one of the many developing changes in the financial industry due to Covid-19. If any of these points makes you consider your current mortgage, and if it is best suited for you, please contact us and we would be happy to discuss the current lender market or your debt structure.

Important Note
Any information provided here is general advice only and does not consider your objectives, financial situation or needs. This information should not be taken as comprehensive and does not constitute legal or financial advice. You should seek legal, financial or other. This content is intended to provide only general information in summary form on tax matters of interest and is only current at the time of publication. This content does not constitute tax advice and should not be relied upon as such. You should seek tax, legal or other professional advice before acting or relying on any content.
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About Yield - Financial Planner Melbourne

Who we serve – We help time poor professionals and business owners who intuitively know they should be doing more to improve their financial position and are seeking an expert to guide them on financial planning strategies. Our clients want personalised financial planning advice and to feel empowered and confident that they can achieve a secure transition to retirement.

What we do – We gain a deep understanding of your current financial position and preferences, what you value and want to achieve. We then help you develop a highly personalised financial plan, to show you how to make your money work harder for you. Ongoing we regularly monitor and measure progress against your plan projections, to show you how you’re tracking and help you manage change to your advantage.

How we do it – We apply our proven expertise in investment markets (Shares & Property), Tax and Debt structuring, Retirement Planning, Risk management and Estate planning, to help you reorganise the way you use your money to achieve your desired outcomes.

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