In the last few days we have seen some interesting things happening in Australia. Official interest rates have risen and at least one major bank has moved their mortgage rates higher than the official rate rise. It’s likely the other big banks (who hold around 80 per cent of mortgages in Australia between them) will follow suit. These same institutions have also just announced their latest round of profits and they are BIG numbers. The last 12 months has seen more than $20 billion profit go to the big 4 banks. Massive increases from companies who are crying poor about increased funding costs (which are being passed straight onto mortgage holders).

It’s enough to make the average Aussie spew.

What can you, the little guy do? You could complain to the government (who will “strongly urge” the banks not to screw their customers, but not stop them by legislating). You could chuck a brick through the front window of a bank (then get arrested, fined and be worse off for breaking the law). Or you could beat them at their own game. Pay off your credit card. Pay off your car loan. Pay off your mortgage. Don’t let a bank win by taking more money from you.

If you don’t know how to pay off your mortgage quickly, then you need to learn how. Sign up to this website. There has never been a better time.

There is plenty of data around to be considered when looking at which way house prices will head in next. Interest rates, land supply, immigration levels, employment levels and economic growth all have an impact.

One important figure which doesn’t get much attention is the ratio of average incomes to average house prices. Historically in Australia, over the long term, this figure has been between 3 and 4 (meaning the average house is is 3-4 times the average income). Currently it’s around 7.5!

At what point would you say “I simply can’t afford to buy that house”? And what do you reckon happens when people, on mass, say the same thing? I don’t know when the downturn in house prices will occur, but average prices simply can’t continue to rise if wages can’t keep up. In reality, a fall in house prices is much more likely than a massive increase in people’s income.

The Reserve Bank has met again and decided what is best for the economy (and inflation) by raising, lowering or keeping steady interest rates. The average homeowner doesn’t give two hoots about the economy, only how interest rate movements will affect them personally.

Some people are living so close to the edge that even a 0.25% increase in interest rates will force them to do something drastic. Like sell their home.

Don’t view interest rates in terms of what they will be doing in the short term. Look at where they could be in the medium and long term, then evaluate how this will impact on you. If you could not handle rates rising again, please get in touch with your lender now. Right now. Give yourself the best chance to hold onto your home by sorting it out early. And if the figures tell you that you need to sell, remember that your family and mental health are worth much more than 4 walls and a roof.

Hope for the best, prepare for the worst – it’s a great philosophy to live by.