Interest rate rises are on the way

There’s a strong feeling among economic commentators that interest rates will rise soon.

The Reserve Bank has signalled that it will continue to review the official cash rate (OCR), which comes in response to New Zealand’s strong economy, low unemployment and unexpected inflation rate. The OCR is currently at 0.5% from October 2021.

A higher OCR translates into higher home loan interest rates for borrowers. How much interest rates will increase by, and how quickly, is anyone’s guess – although some of the banks have already begun to lift their rates in anticipation.

What can you do plan ahead for higher home loan costs?

Review all your loans so you know where you stand. That way you can make a solid plan. It’s important to know the answers to questions like these:

• What loans do you have?
• Is the purpose for lending still relevant and are there alternatives?
• How much is floating and how much is fixed?
• When do the fixed-term loans expire?
• What interest rates are you currently paying on your loans?
• Are there any restrictions on your borrowing arrangements?

Consider your options

Restructuring your loans can reduce your mortgage payments or help you pay off your loans more quickly. You can also split up loans in order to balance out the ups and downs of the market. That means various loans roll over at different times, so you don’t get caught by all your debt rolling onto a much higher rate at some point in the future.

You might be surprised at the amount of flexibility that’s possible with your loans, especially if you have plenty of equity in your property. New borrowers can often negotiate preferential rates and sometimes cashback or gifts, too. A mortgage advisor can give you expert advice on the best structure for your situation.

Talk to us, your lender or your broker

We’re here to help, so if you’re worried about increasing loan interest rates, get in touch and we can run you through some of your options. We can also recommend a mortgage advisor if you don’t already have a knowledgeable broker. Give us a call or drop us a note, we’d love to hear from you.

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