If your lender allows for extra repayments without penalty, then acting now to chip away at your loan principal with additional payments may be worth considering. The more you can reduce your principal owing, the more you may be able to reduce your monthly mortgage repayments.

RateCity crunched the numbers and found that even paying an extra $50 a week into a 25-year, $750,000 home loan with a rate of 3%, may save them almost $29,000 in interest over the life of the loan.

If your lender provides an offset account, it may also be worth considering utilising this home loan feature.

This is a linked transaction account to your home loan. Unlike extra repayments which chip away at your principal, the funds you deposit in your offset account work to ‘offset’ or reduce the amount you pay in interest. Plus, you have the added bonus of being able to potentially withdraw these funds if needed, such as for a home renovation.

On average, homeowners using their offset accounts may be four years ahead on their repayments, according to the latest APRA data. RateCity research found that this same homeowner with a $750,000 mortgage with this average amount of $100,000 in their offset account may save over $16,000 in interest over five years.

If your lender hikes your interest rate past a point that you can comfortably service, and you’ve been repaying your mortgage for several years with some equity built up, it may be worth researching lower-rate lenders. Refinancing to a lower-rate home loan may be one option to give yourself a rate cut in a time of increasing interest rates.

RateCity research shows that if a homeowner five years into their 30-year, $500,000 mortgage refinanced, they may be able to save thousands in interest repayments.

Property investors have “missed the boat” for fixed rates and should instead shop around for cheapest variable rates, financial and mortgage advisers say.

Mortgage brokers are urging borrowers to “calmly consider their options” and not rush into more expensive alternatives, such as switching from a variable to a fixed rate. 

While fixed-rate loans offer some certainty about repayments, they often don’t allow extra payments, are costly to exit and have fewer loan features, such as offset accounts or redraw facilities.

Trustees of self-managed super funds investing in property should undertake a full review to ensure there is sufficient liquidity to deal with any financial pressure from rising rates and costs.

SMSF specialists warn increasing expenses might require trustees to increase member contributions, raise rents or sell fund assets to meet increasing liabilities, such as paying pension benefits.

Julie Dolan, head of SMSF and estate planning for KPMG Enterprise, says: “Trustees should play it safe and have a couple of years’ rental income in the fund as a buffer.”

Loan repayments must come from the fund, which means there must be sufficient liquidity or cash flow to meet loan repayments.

Strategies to ensure adequate liquidity to meet rising mortgage rates include:

• Rent increases. Record low rental vacancies mean landlords have an unprecedented opportunity to raise rents.
• Increase contributions. If rental income does not cover rising rates, contributions can be made to the fund – but these are capped at $27,500 a year (for pre-tax contributions) and $110,000 a year (for contributions with no tax deduction).

Shop around for a cheaper loan. Big lenders, such as Commonwealth Bank and Westpac, no longer offer SMSF loans. Rates from smaller lenders are typically higher, with some having upfront fees of more than $3000 and annual charges of about $400.