Our Lenders

Home Loan Information

Like This Site

Beating High Interest Rates

Solutions to Beat High Interest Rates

As was expected by the majority of our economists, the Reserve Bank announced on the 31st January that they decided to maintain the repo rate at the current 11% level in spite of the fact that CPIX catapulted to 8.6% year-on-year during December 2007. However, unless inflation is brought down to more acceptable levels shortly, the repo rate reprieve could well be of a temporary nature.

Realistically speaking, there is a very real chance that (unless a turning point is reached) 2008 will see at least a further two repo rate hikes. With this in mind, you may want to start exploring different ways and means to beat the prevailing high interest rates that affects all the interest bearing debt you may have.

Here are a few tips and pointers that may prove to be helpful:

1. Negotiate a better interest rate with your bank. Your bank will, in all likelihood, be prepared to re-evaluate the interest rate applicable to your home loan. They will check whether there have been substantial improvements in terms of your credit profile and note the amount of business you conduct with them. These would typically include credit card accounts and motor vehicle financing. If everything checks out, the bank will probably grant a rate concession.

2. If your bank, for whatever reason, denies your request for a rate concession, you could consider switching your home loan to a different bank or non-bank lender. The best way to go about this is to appoint a reputable mortgage originator. Many originators have multiple relationships: with the big banks, the private banks and other non-bank lenders. An important benefit associated with using a mortgage originator is that mortgage originators have the ability to secure better rate concessions than individuals. Your originator will negotiate and request quotes from the various lenders on your behalf. You can then work with the originator to determine whether there is any benefit to be had, should you refinance.

3. If you have already whittled the interest rate down to the extent that it can go no lower - save for a repo rate decrease - you could consider changing the term of your home loan. There are two options:

Term extension: If, for example, your home loan is for a 20 year period, you can extend the term to 30 years. This will decrease the repayments and remove some of the repayment risk.

Re-advancement: If, for example, your home loan is for a 30 year period, and you have been paying for five years already, you can ask the bank to add the five years to your remaining 25 year term. As was the case with a term extension, re-advancement will reduce the minimum repayments you need to make against your home loan.

4. Home loans, when compared to other forms of interest bearing debt, are inexpensive. Getting a handle on your expensive interest bearing debts (i.e. credit cards, motor vehicle finance etc.) and consolidating that debt quickly and efficiently, are key. Here are a few things you can do to get ahead in the game:

Consolidate all your credit card debts into a single credit card and pay it off diligently.

Stop charging purchases to your credit card and the other charge cards you may hold with the various chain stores. Cash is King.

Put the cash you have left every month towards paying your most expensive debt item. When that is done, target the second most expensive debt item. Then the third, the fourth… and so on.

Getting geared to beat high interest rates, takes time. There is no need to wait until disaster strikes. You will probably find that there is no time better than now for taking decisive action. After all, who knows what will be decided at the next MPC? And that is never more than three months away.

Subscribe to our Newsletter

Online Application

Interest Rates

Testimonial