How to cope with higher interest rates
High interest rates have seriously impacted personal finances. This is how homeowners and buyers can cope.
While the Seeff Property Group continues to advocate strongly for lower interest rates as the higher rates are stifling the economy and property market, the reality is that the higher rate may be around for a while longer.
While nobody can control that, making some adjustments can help consumers, homeowners, and prospective buyers navigate the new market realities much better. Sellers and buyers must adjust their outlook, says Seeff. If you are selling, you may now need to relook your asking price.
How to adjust
If you are buying, you need to adjust to higher repayments, or you could buy for slightly less to ensure you have a financial buffer. Samuel Seeff, chairman of the Seeff Property Group, says the good news is that the banks are still lending, and qualifying buyers can still find favourable terms.
Recognising the impact and making some adjustments can go a long way. Start by reviewing your budget and making adjustments. Look at where you can cut by cancelling unnecessary subscriptions and shopping around for cheaper insurance premiums.
You should focus on reducing your debts. Financial planners suggest paying a little extra every month on your debts or focusing on reducing high-interest debts such as credit and store cards first. This will free up cash to further reduce your debt. Do not make further debt; rather, cut back on your living costs.
You could also look at accessing surplus funds in your mortgage loan. If you have an access bond, you can access any surplus funds accumulated to pay off some debts. Seeff’s mortgage originator, ooba, says you could also refinance your home loan. This will require a new bond to be registered, which will be based on the latest value of your property.
If you are struggling to pay or are falling behind, you should look to arrange new payment plans. Debt counsellors suggest you do not wait because it will just get worse. Rather, contact the lender or retail store to make new arrangements. You should aim to avoid bad debts and a negative impact on your credit score.
Your home is vital. Avoid financial distress on your home loan by immediately contacting your mortgage bank if you are battling to keep up with the repayments so that you can make alternative arrangements.
If you are selling for urgent financial reasons, you should be upfront with the agent so they can assist you in the best way possible.
You could also consider downgrading your property. There are many options. You may be at a life stage where you could downgrade your home, and benefit from an easier lifestyle and added cash by going smaller.
The guidelines revealed above are a good start when dealing with high interest rates.
Writer: Gina Meintjes
