Interest Rates Impact Your Monthly Mortgage Repayments – But How Much?

by Greg on February 10, 2016

interest rates

Many people worry about how fluctuations in interest rates can impact their monthly mortgage repayments. The world of finance is forever changing, so increases and decreases in interest rates are important to consider when looking for a new mortgage.

What Happens If Interest Rates Increase?

While usually a good sign for the wider economy, rising interest rates are not all that great for borrowers! When interest rates go up, mortgage repayments rise with them – and higher repayments will of course mean there’s less left at the end of the month for all those little extras!

Fortunately, there are some things you can do to limit the impact of an interest rate rise.

As a borrower you should always make sure that you get the most competitive deal available. The lower your initial monthly repayments, the better your financial position will be if rates increase further down the line. Be sure to only apply for a home loan if you know you can afford the monthly repayments, then calculate what your payments could be should interest rates go up to make sure you can comfortably afford those as well.

What Happens If Interest Rates Fall?

When interest rates fall, it usually has a knock-on effect on asset prices and the value of homes and commercial properties often increase in value.

As a result loan repayments are usually lower, which may mean more financial freedom to splurge on the things you love or to put money away into savings.

Anyone applying for a home loan during a period of low interest should bear a few things in mind. Fixed rate home loans during a period of low interest can be uncompetitive and you may pay over the odds. It’s often a good option to go with a variable rate loan with the option to fix at a later date.

Rising and falling interest rates can have a significant impact on the cost of your repayments over time, so it’s really important that you take any fluctuations into consideration before taking out any home loan. Make sure you get the best deal available on a variable rate home loan and that you can afford any unexpected rate increases. If you are able to take a fixed rate home loan option, this is likely to cost more but will protect you from interest rate fluctuations.

If you would like to know more about fixed and variable rate home loans from Liberty – don’t hesitate to give them a call on 13 11 33 or visit their website for more information.

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