Rate Shock!
What is it? Its not the shock you get when you finally decide to check your interest rate and realise you're paying way too much....
Rate Shock occurs when the interest rate you're paying jumps up dramatically - and your repayments with it.
Usually this is related to "introductory rate" loans - but right now I'm a little concerned about rate shock when the current super super low fixed rates expire in 3 or 4 years time. Now, I don't think anyone is predicting the market will rise rapidly, however I also don't think anyone is expecting rates will be these same historic lows in 3-4 years - and if you are very used to a super low interest rate, any change could some a quite a shock to the system.
So what can you do about it?
Well, I know the economy really needs your stimulus, but, could you keep making the repayments based on last years interest rates? What that will do is:
Cushion the effect of any future rate rises
Allow you to build a buffer for anything unforeseen - hello 2020!
And save you bundles of interest.
And you know what, if something worthwhile does crop up, you could potentially redraw those extra repayments from your variable split or your offset and 'stimulate' the economy if you wanted to.
