How to cope with your anxiety around interest rate hikes


According to some reports, $99 billion worth of mortgages are coming off a fixed rate in the second half of 2023 from Australia's two biggest banks alone. It is such a significant figure that it's being termed the mortgage cliff.

With interest rates so unpredictable, this change is becoming an increasing worry for many. We hear from a growing number that they are being consumed and overwhelmed by information and "expert" advice.

Paralysed, as they attempt to analyse information, they don't feel as if they completely understand and they're unable to think clearly in the dizzying noise of choice. Anxiety is on the rise, interrupting sleep and consuming cognitive energy.

how to deal with anxiety over interest rate rises

The reason we experience the anxiety emotion is to heighten awareness of potential danger and ready us for action - to do something. If we don't know what the best thing "to do" is, our anxiety holds and we become paralysed by fear, particularly the fear of making the wrong choice.

Starting out as concern, it quickly escalates to a state of apprehension and worry. You learn as much as you can, but if this takes too long, you get exhausted and move into the overwhelmed state, getting lost in the sea of new and complex information. This leads to the highest arousal of anxiety - panic, where you tend to lose any rational control over your actions.

Anxiety is an emotion that needs to be released by action, so when you become paralysed by choice and fear your instinctive brain takes over, making all sorts of illogical and counter-productive decisions. In this state we often take our cues from what other people are doing - they are also often acting from their survival instinct.

The power of the herd is strong when we don't know what to do. Think of a run on the banks, wild stockmarket fluctuations and panic buying.

Some people are still working their way through the toilet paper stash hoarded at the beginning of the pandemic. This is classic panic-fuelled, irrational behaviour that felt prudent at the time.

Physiologically, when you feel anxious, the stress hormones in your stomach stimulate "butterflies" and can make you feel sick. It indicates something in the environment is wrong, different or new.

Blood is directed away from your hands and feet, making them clammy and sweaty as your heart works hard to pump blood to arms and leg muscles ready for escape. Sustained stress often tires your limbs due to over-stimulation, making you feel lethargic and exhausted.

Anxiety does not discriminate between different types of change and uncertainty. Therefore, managing our anxiety during an impending market change is not that dissimilar to managing our anxiety while navigating a global pandemic.

With time and space, we grew more familiar with the virus and its impact, we understood more about the different vaccines and how we could live in ways to reduce risk.

Two years on, we started worrying less about a future we couldn't see (which we never can) and instead calmly focused on more immediate actions, which reinstated our sense of control.

So, when you feel you are starting to become paralysed by analysis and panicking about what to do, think of that toilet paper stash you might still have in the cupboard. You will be okay. Take a breath, have a break and keep reminding yourself that the answer will reveal itself eventually with time and focus.

Three tactics to help you make better decisions

1. Create time and space. 

I have been in many negotiations where we've requested an overnight break.

Not feeling rushed reduces the sense of immediate threat and allows for more cognitive energy to be spent solving the problem at hand.

2. Rename and reframe the emotion

This is an old trick that comes from sports psychology. When you feel the butterflies of nervousness and stress, tell yourself that you are actually excited and full of anticipation about the challenge ahead.

Nervousness and anticipation look exactly the same in the brain, so simply reframing what the feeling means can have a huge impact on your performance, energy and attitude.

3. Externalise the subject matter

Think of the issue as someone else's problem that you are advising on.

This allows you to reduce the level of personal threat and better consider new or creative solutions.

Need to talk to someone?
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National Debt Helpline: 1800 007 007. 

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Phil Slade is a behavioural economist and psychologist and the author of Going Ape S#!t! and founder of Decida. He works across digital innovation, strategy and cognitive bias. Phil holds a Bachelor of Psychology from The University of Queensland and a Master of Organisational Psychology from Griffith University.
Alan Sapsford
March 12, 2023 11.55am

Good practical advice, concisely given is rare - cheers to a value piece