How to combat inflation and rising interest rates:

Tips for protecting your wealth

In recent years, many people have enjoyed low mortgage interest rates and a relatively stable cost of living. However, over the past 10-12 months this has changed. Now that we are in a period of higher mortgage interest rates, higher cost of living, and higher inflation, it's essential to take steps to protect your finances and ensure you're prepared for the challenges ahead. We explore financial advice to help you navigate the upcoming changes.

Higher Mortgage Interest Rates:

Mortgage interest rates have been at historic lows for many years, but with the 10th consecutive interest rate increase in March 2023, this has changed. If you're currently on a variable-rate mortgage, your payments have increased significantly over the past 10-12 months, with the rising interest rates. However, if you're on a fixed-rate mortgage, your payments will remain the same, but you'll need to consider what happens when your fixed term comes to an end (which the RBA is estimating to be 800,000 fixed rate loans are set to expire in 2023).

Refinance Your Mortgage:

If you're on a variable-rate mortgage, it may be worth considering refinancing to a fixed-rate mortgage. This will provide you with stability and protect you from future interest rate increases. However, you'll need to consider the costs involved in refinancing and whether this makes financial sense for you.

We highly recommend speaking with your bank, and/or your mortgage broker.

If you do not have a mortgage broker, we have a panel of specialised mortgage brokers, that will support you to find the best possible outcome.

Review Your Budget:

If your mortgage payments are set to increase, it's essential to review your budget and ensure that you can still meet your other financial commitments. You may need to cut back on discretionary spending to make room for your increased mortgage payments.

For many people that we find under financial stress, they generally do not understand where all their money is going and how they are spending it. This is a critical stage that can be daunting and overwhelming, but is essential in understanding how to reduce your expenses.

Consider Overpaying Your Mortgage:

If you have spare cash, it may be worth considering overpaying your mortgage or putting your surplus cash into an offset account. This will help you reduce the overall term of your mortgage and save money on interest in the long run.

Higher Cost of Living:

The cost of living has been relatively stable in recent years, but this has changed over the past 12 months. Rising inflation and supply chain disruptions have resulted in higher prices for goods and services.

Review Your Spending Habits:

It's essential to review your spending habits and identify areas where you can cut back. Consider making changes to your lifestyle, such as reducing your streaming services, subscriptions, gambling, cigarettes, alcohol, car usage or eating out less often, to help you save money.

Build an Emergency Fund:

If you don't already have an emergency fund, now is the time to start building one. This will provide you with a financial cushion in the event of an unexpected expense, such as a car repair or a medical bill.

Shop Around for the Best Deals:

As the cost of living increases, it's important to shop around for the best deals on goods and services. Look for ways to save money, such as switching to a cheaper supermarket or negotiating better deals with your service providers.

Higher Inflation:

Inflation is expected to rise in the near future, which means that the purchasing power of your money will decrease over time. It's essential to take steps to protect your finances from the effects of inflation.

Consider Investing in Inflation-Protected Assets:

Inflation-protected assets, such as inflation-linked bonds or commodities, can help protect your finances from the effects of inflation. These assets typically increase in value as inflation rises, providing you with a hedge against inflation.

Review Your Investment Portfolio:

If you have investments, it's important to review your portfolio with your financial planner and ensure that it's well-diversified. Consider investing in a mix of assets, such as equities, bonds, and commodities, to help spread your risk.

The market will continue to be very volatile during these uncertain times, with rising unemployment, insolvencies, and higher inflation for longer, we need to continue to review your investment strategy and underlying portfolio to that of your long term goals and risk tolerance.

Build Your Retirement Savings:

Inflation can have a significant impact on the value of your retirement savings. It's essential to build your retirement savings and ensure that you have enough to support your lifestyle in retirement, even if inflation continues to rise.