How to restructure your home loan to manage rising interest rates

While many Aussie homeowners continue to navigate the pressures of rising interest rates, it’s important to know that we’re here to help. From restructuring your loan to using budgeting apps, here are a few simple strategies to help you stay on track with your budget and home loan repayments. 

Understand how rising interest rates will impact your budget.

The first step in managing rising interest rates is understanding how your home loan repayments may change over the next six to eighteen months. You could be on a fixed rate home loan, a variable home loan, or a split of the two. Whichever type of home loan you currently have, it’s helpful to prepare yourself for a range of scenarios.

Possible rise in monthly repayments* - various rate rises

^{Source: BoQ Loan Repayment Calculator}

^{*Based on Principal and interest loan with 25 year loan term}

To find out how your loan repayments could change in the future, try using our loan repayment calculator. It allows you to do the sums for a range of scenarios so you can feel more prepared when rates change.

Restructure your home loan repayments.

Did you know you can adjust your home loan repayments? You can do this a number of ways, like switching from monthly to fortnightly repayments, or only paying off your minimum monthly repayment. You can use our loan repayment calculator to work out if there is a better payment structure or frequency that could help free up cash within your household budget.

Just remember – while changing your repayment frequency might make it easier to make ends meet right now, it could also increase your total interest repayments over the term of the loan. Make sure you do your research and crunch the numbers to make the best possible decision for your situation.

Reduce your principal loan amount, extend your loan term, or switch to interest only repayments.

You can also consider making more complex changes to your loan, like reducing your principal loan amount, extending your loan term or switching to interest-only repayments.

You can change your loan by making a lump sum payment to permanently reduce the principal amount of your loan and recalculating the loan balance, or extend your loan term.

Moving to an interest only loan for a fixed period means you only pay the interest and not the principal on your loan and will reduce the amount of your loan repayments. While this can help you manage temporary changes, remember that you will pay more in interest over time, while not paying down the principal.

These changes to your home loan need careful consideration, but we’re here to help. Contact us and we can guide you on the best approach for your circumstances.

Review your budget.

It’s always a good time to review your budget. Rather than being a ‘set and forget’ exercise, make time to regularly review your spending against your planned budget.

You could do this over dinner once a month, or through the practice of ‘habit stacking’, where you ‘stack’ a new habit, like checking your budget with an old one you already do regularly, like paying your household bills.

For example:

• After I sit down to pay my bills, I’ll review my budget.
• When I make my grocery list for the week, I’ll check my budgeting app to see how I’m tracking on food costs for the month.
• While I’m waiting for my takeaway delivery, I’ll review my bank accounts.

Head to our Budget Planner and we’ll do the heavy lifting for you or search online for your own budgeting apps.

Save money on household expenses.

With energy costs continuing to rise, you could unlock savings by switching providers.  Head online to compare your energy plan against other providers.

Grocery expenses also contribute to a significant portion of household budgets. By simply changing where you shop, you could save yourself a whole lot of money

Auto renewals and subscriptions are also a common source of budget and lifestyle creep. One savings tip is to review your auto-renewals regularly like home and car insurance, mobile and internet, health cover, gym memberships and streaming services.

Chances are you have a host of subscriptions for services you’re not using or getting the most out of. Ask yourself: do you really need three different streaming services? Consider only using one and moving onto the next when you’re looking for some fresh entertainment.

Don't be afraid to reach out for help.

Life doesn’t always go to plan, and financial hardship can happen to anyone – whether it’s through unexpected expenses, job loss, separation, natural disaster, or illness. If you’re finding it hard to make ends meet, contact our financial assistance team to help you create a repayment plan and provide helpful tips and advice.  While it can be daunting to take the first step, we’re here to help.

Contact your local branch