Tips, tricks, and what to

INTEREST rate hikes have piled on hundreds of dollars in hip pocket pain for anyone with a mortgage and reshaped the property market this year. After five rate hikes in as many months, a typical $500,000 mortgage with a variable rate now costs more than $600 extra a month.

Now in the year’s busy spring market, experts have revealed how this is affecting buyers and sellers, as well as which loan types and features could help beat the bank this spring.

Mortgage Choice broker David Thurmond said first-home buyers were worst off, after a six-figure hit to their borrowing capacity this year.

“Someone who could afford to borrow $700,000 in May is looking at $500,000 now,” Mr Thurmond said.

“And there’s not a whole lot you can do to beat higher interest rates, other than go out and earn more money.

“Some lucky people might be able to get more of a gift from mum and dad, otherwise it’s a matter of buying something more affordable.”

But with rates tipped to rise to 5 per cent by the end of the year, and already starting to hurt some people, he warned forced sales were on the way for some overstretched owners.

“We are having difficult conversations with people who have taken out loans when rates were at their lowest and telling them not to put their head in the sand,” he said.

For these reluctant sellers, a lower rate, a loan holiday or even swapping to an interest-only loan could “buy you time to do it right”.

But he said the first step should be to speak to a loan broker, with about 15 lenders today offering $2000-$6000 in cash back for switching – no strings attached.

For those struggling to meet repayments, or worried about the future, this could be enough to avoid the “oh no moment”of a forced sale.

Your Property Success mortgage broker and property investment guru Jane Slack-Smith said while dire for some, rising rates had ironically made it a good time to buy.

“There is pain, but if you have the opportunity and the buffer I’m definitely seeing people who are being the contrarian investor,” Ms Slack-Smith said.

The environment also means sellers are generally committed to getting a deal done. And it’s not only sellers who are ready to negotiate.

“The banks’ people who deal with brokers are telling us there’s more they can do to get better pricing than is on their website,” she said.

Ms Slack-Smith said banks were more generous for larger loans, which put upsizers in the box seat, but the best deals might involve leaving your current lender.

“You probably will find there are more aggressive rates from other lenders,” she said.

“And there might be a bigger discount for a higher loan.”

A former explosives engineer, Ms Slack-Smith aims to de-risk property investment and warned those thinking of buying to consider their position before bargain hunting

“Just because you could pick up a property now $30,000 cheaper than in a year’s time, if you don’t have the funds or the buffer, don’t do it,” Ms SlackSmith said.

“The best way to de-risk is not to take a risk.”

Variable rate home loans rise and fall with the Reserve Bank of Australia’s monthly cash-rate call, but typically have the lowest interest rate available with a bank, with no extra fees or costs if you want to pay more of your mortgage off.

Mr Thurmond said the only drawback was the unknown of how high rates might rise in this cycle. But with finance experts already hinting rates could fall next year, he said most of his clients were taking a variable rate.

At present, about 40 per cent of Australians have a fixed-rate loan (or partially fixed), according to Mr Thurmond.

These borrowers know exactly what their monthly repayment will be until the end of their fixed term (typically, one, two or three years).

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