As interest rates rise, your [home loan repayments](https://www.lendi.com.au/calculators/home-loan-repayment-calculator/) may too. This will be more of an issue for borrowers with larger loans, but it’ll affect anybody who has borrowed money. 

Here are 8 tips to help you prepare for home loan interest rate increases. 

- __Related:__ [How much interest you're actually paying over the life of your loan](https://www.lendi.com.au/inspire/finance/how-much-interest-you-pay-over-life-of-loan/)
- __Related:__ [How interest rate increases could impact new borrowers](https://www.lendi.com.au/inspire/finance/interest-rate-increases-impact-new-borrowers/)
- __Related:__ [Supercharge your monthly savings with our 8 handy tips](https://www.lendi.com.au/inspire/finance/supercharge-your-monthly-savings-tips/)

&nbsp;
## 1. Review your budget

There’s a chance that your home loan is going to be costing you more, so it’s smart to see where you could save money in other areas of your life. 

Start by thoroughly analysing your current budget, spending habits and savings. 

Consider whether there is room for improvement in how you spend your money. 

For example, as delicious as takeaway dinner from your local Thai restaurant may be, does it really need to be a weekly thing? Consider saving takeaway and restaurant meals for special occasions - at least until you get on top of your financial situation.

You may also be able to negotiate things like phone and internet plans, electricity charges and more. Many providers are willing to give loyal customers a better deal, and all you have to do is ask. 

The Australian Government’s Moneysmart website has a useful [budget planner](https://moneysmart.gov.au/budgeting/budget-planner) to help you keep track of where your money is going. 

&nbsp;
## 2. Pay down your other debts

Having multiple debts at once can be overwhelming at the best of times, but it can become more stressful when [interest rates rise](https://www.lendi.com.au/inspire/finance/interest-rates-are-rising-how-to-save/). 

Interest rates can also rise on other credit products, not just home loans. So, it’s a good idea to see if you can pay down your other debts. These may include:

- Credit cards
- Personal loans
- Car loans
- Bills (e.g. gas, electricity, phone, internet)

You can also consider streamlining your debts under your home loan through [debt consolidation](https://www.lendi.com.au/home-loans/debt-consolidation/). This refers to bundling your debt (e.g. car loan, personal loan, credit cards) together with your mortgage so that you simply make one monthly repayment. 

Doing this can reduce the risk of you accidentally missing repayments and damaging your [credit score](https://www.lendi.com.au/inspire/finance/6-ways-to-improve-your-credit-score-quickly/). Plus, you’ll benefit from the lower interest rates associated with home loans. 

Doing this doesn’t mean you have to repay those debts over the remainder of your home loan term and risk spending more in interest. You can select a timeframe under which you repay your consolidated debt within your home loan. 

For example, if you have 10 years left on your mortgage term, you could set a 3 year repayment period for your [consolidated debt](https://www.lendi.com.au/inspire/finance/how-to-consolidate-debt-by-refinancing-property/). 

%%How much can you save by consolidating debt?%%

&nbsp;
## 3. Make extra repayments on your home loan

The smaller your loan balance, the less interest you’ll be charged. So if you can, work on putting some [extra money](https://www.lendi.com.au/inspire/finance/how-can-i-pay-off-my-home-loan-faster/) towards your home loan in the form of additional repayments. 

Those with a [variable interest rate](https://www.lendi.com.au/home-loans/variable-rate/) on their home loan can typically make unlimited extra repayments, but [fixed rate](https://www.lendi.com.au/home-loans/fixed-rate/) borrowers should be aware of any restrictions on making extra repayments.

Some lenders will penalise fixed rate borrowers for making extra repayments by charging [break fees](https://www.lendi.com.au/inspire/finance/loan-break-costs-explained-how-to-avoid/). 

All borrowers should be smart about making additional repayments on top of their usual ones - don’t make extra repayments if you can’t actually afford to do so. 

&nbsp;
## 4. Put your savings in a high interest savings account

Higher interest rates aren’t bad news for everyone! If you have a lot of cash saved, make sure it’s sitting in a high interest savings account. When interest rates go up, you’ll earn more interest on your savings. 

Try to avoid withdrawing money from this account as the more money you have in it, the more interest you will accrue. Some banks also might not give you interest if you withdraw money from your savings regularly.

&nbsp;
## 5. Use an offset account 

Another way to save on interest as rates rise is to use an [offset account](https://www.lendi.com.au/home-loans/offset-account/) with your home loan. 

An offset account is a type of savings account that is attached to your home loan. Any money in the account offsets the interest charged on your home loan. 

Say you have a remaining home loan balance of $470,000 and you have $25,000 in your offset account. 

You will only be charged interest on $445,000 instead of $470,000 ($470,000 - $25,000 = $445,000). 

Typically your offset account isn’t the bank account you would use for everyday transactions. 

Instead, you might put savings into this account to grow its balance and help save on home loan interest. 

%%Wondering how much you could borrow?%%

&nbsp;
## 6. Compare your interest rate regularly 

Keeping on top of interest rate news and comparing your home loan rate to others on the market can help you stay on top of your mortgage when rates are rising. 

Even though interest rates are rising across the board, it’s still possible that there are lower rates out there. 

Now could also be a good opportunity to review your loan as a whole to make sure it’s still right for you – especially if it’s been a few years since you obtained the loan or refinanced. 

%%How much can you save by refinancing?%%

&nbsp;
## 7. Talk with your lender about moving to a lower rate 

If you review your loan and find it’s not competitive with others on the market, you might benefit from chatting to your lender about lowering your interest rate. 

You could also check to see what rate new borrowers are being offered. You may be paying a loyalty tax. This can happen when lenders charge existing borrowers a higher interest rate than new borrowers. 

A Home Loan Specialist or mortgage broker can help negotiate on your behalf. 

Don’t be afraid to switch lenders if you find a better deal elsewhere but be aware of the costs of refinancing. 

&nbsp;
## 8 Review your home loan and consider refinancing

This could also be a good time to consider [refinancing](https://www.lendi.com.au/home-loans/refinance/), or at the very least review your home loan. 

If some time has passed since you last refinanced (or initially obtained your loan), you may not have the most suitable loan for your circumstances.

For example, you may have a higher income, more savings, and could make use of an [offset account](https://www.lendi.com.au/guides/offset-account/). 

[Offset accounts](https://www.lendi.com.au/calculators/offset-calculator/) help reduce the amount of interest charged on your home loan, and could offset the impact of an interest rate increase.

If you’re not sure whether your home loan is still a good fit for you, consider speaking with a [mortgage broker](https://www.lendi.com.au/book-appointment/) for free expert advice. 

&nbsp;
## What could your home loan repayments look like?

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## Got a home loan question? Just ask!
We're here to help. Get free expert advice at a time that suits you. Choose a time to chat with a [Home Loan Specialist here](https://www.lendi.com.au/book-appointment/)

*The information in this post is general in nature and should not be considered personal or financial advice. You should always seek professional advice or assistance before making any financial decisions.*

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