Q. Interest rates have been steady for a while now, but I am worried about what will happen when they start to increase. How can I prepare for possible interest rate rises now so I won’t be in trouble down the track?
A. Now is a great time to start preparing for interest rate rises as you can slowly start to implement changes to your budget, rather than having to do it all at once. There are a few different things you can do to cater for larger mortgage repayments and also get ahead on your mortgage at the same time.
Firstly, if you are only making minimum repayments on your mortgage, you may want to consider increasing the amount while interest rates are low. This way, if interest rates do rise, you will already be making larger repayments so the change may not affect you too much and you will also be paying extra off your home loan at the same time while rates are low.
Secondly, you may want to create an emergency fund in case you are unable to cope with the larger repayments in the beginning. You can then use the money from this fund to cover the repayments until you restructure your budget.