The Reserve Bank (RBA) lifted interest rates twelve times in just over a year leaving many homeowners feeling the pinch of increased mortgage repayments. Since the RBA began lifting rates in May 2022, those with an average $600,000 mortgage are paying up to $17,000 extra per year on their mortgage. The impact on household savings and tighter refinancing conditions have caused borrowers to fall behind on their mortgage which causes a great deal of stress.

So, what to do? We know times are tough and that families need solutions to generate extra income to pay the mortgage and stimulate their savings.

Research savings accounts

Rising interest rates may be causing pressure, but interest rates on savings accounts have also gone up which presents an opportunity to make your savings work harder. It’s worth researching savings accounts as many banks offer a variety of products designed to help you achieve your savings goals faster.

For example, Suncorp Bank has a product called flexiRates that allows you to set aside a portion of money with terms from one month to 12 months. Rates vary from 4.30% to 4.80%. If you have more money in savings than you need for your short-term expenses, you can set aside a portion of it at a higher fixed interest rate than the unlocked portion. For example, if you’ve got $10,000 saved but only need $2,000 in the near future, you can apply a six-month flexiRate (with no additional account keeping or transaction fees) to the unused $8,000 and earn more interest on that balance than you do on the $2,000.

Save via your super 

Another savings technique is to divert money into your super – up to a total of $15,000 per year. The maximum you can earn is $30,000 per person or $60,000 per couple. You can then withdraw this and use it as a lump sum on your mortgage or, if you’re starting out, as a deposit on your first home.

The benefit of this forced savings strategy is that you’ll pay less exit tax than your marginal tax rate which equals more deposit.  You’ll need to shop around though and look at what your super fund is offering compared to what flexiRates and similar savings accounts are offering at any given time.

Upgrade your hot water system to a heat pump hot water system

If you’re a homeowner, there are always ways to economise around the home, especially with items like hot water systems. Consider the benefits of installing a heat pump hot water system that transfers ambient heat rather than generating it, thus saving you a significant amount of money.  Upgrading your hot water system to a heat pump system has multiple benefits. In addition to saving you money, heat pump water systems are environmentally friendly, low maintenance, quieter to run and can last up to 15 years.  Look for current government, manufacturer or supplier rebates and deals that may help reduce your installation costs.

Even though times are tough now, there are always options to make your money work harder for you.