Mortgage rate reality check

What should you do with your mortgage rate today?

If you’ve spent any time reading the news this morning you already know the media tone continues to be doom, gloom and misery, served up with a side of agenda.

HEADLINE 1: “Reserve Bank’s interest rate rise will be new – and worrying – to a lot of voters”

Unsurprisingly, the Reserve Bank lifted the official cash rate (OCR) by 0.25% as of yesterday. Lower than the 0.50% expected by some.

Worrying for many homeowners, the word on the street is the Reserve Bank sees the OCR increasing to potentially 3.4% by the end of 2024. But this is NOT a given, with various global events at play:

  • Russia and Croatia and the emerging potential clashes between the leading global economies
  • High inflation world-wide
  • And the ongoing effects of COVID and Omicron

 

That’s what they said

Some commentators including banks, economists etc, fear the possibility that mortgage rates could increase to circa 6%.

As this noisy, downside, economic commentary continues to run rife across most media channels, we, as average consumers can naturally become worried about the impact these changes will have on our ability to meet our mortgage committments with the same ease, moving forward.

HEADLINE: “House prices ‘could fall 10 per cent’ as result of official cash rate forecast, economist says”

Compounding these uncertainties according to Tony Alexander, house prices could fall between 5-10% over the next two years (not made quite as clear in that big, bold, scary heading!)

In terms of interest rates, John Bolton counters, that we may end up sitting somewhere closer to 5 rather than 6% noting, “people need not panic, because the top of the cycle being forecast by the Reserve Bank had already been largely priced in by the big banks”. This is evidenced by recent increases across the board by most banks.

 

Through the crystal ball

Based on the wide-ranging media commentary, and the opinions of the Reserve Bank, government and economists etc, if we were to look through our own crystal ball, what does all of this actually mean for the average homeowner in NZ today?

What should your next move be?

What’s your best option moving forward?

You can be sure of one thing – you don’t want to stick-your-balls-out and sit on 5 years!

So here’s 4 key things every homeowner should consider:

  1. Revisit the household budget and identify where savings could be made
  2. Know your dates – when is your next rollover, refix due?
  3. Compare the rate your bank automatically offers you
  4. Consider changing your loan structure

 

When it comes to comparing interest rates, that takes legwork and time. Many of us don’t have space for it. That’s why we created the role of Fixed Rate Specialist here at Quantum. Tegan works in conjunction with our team of expert financial advisers (brokers) to take care of the legwork and negotiations on your behalf, at no cost to you. Getting unbiased advice that gives you the big picture on what’s being offered across the board daily is invaluable.

Changing your loan structure means breaking your current loan into several pieces. Why? This allows you to spread your interest rate risk, and gives space for voluntary repayments. If you’re looking to reduce your mortgage as soon as possible, a smaller, more manageable portion at say 1-year fixed, with the intent to make a bulk reduction at the end of this term, will help with getting mortgage free faster. The remainder of your mortgage could then be locked in for potentially 2-3 years, to counter the effect of current rate rises but also the white elephant in the room (whether the OCR and interest rate forecast levels will be met by the time your next refix is due).

 

So, what’s the bottom line?

With so much in the media and some conflicting views, combined with agendas, what is the bottom line for homeowners today?

What’s YOUR end goal?

Those conflicting views and agendas often do not take into account YOUR individual situation, goals, and ambitions. And that’s why the bottom line is, talk to an expert, financial adviser (broker), and get unbiased advice that best fits your world right now.

 

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Who the hell is Daz?

Darren Fitness is a Financial Adviser-Mortgage Specialist, and Head of Business & Asset Finance at Quantum.

His career began in 1984 with one of NZ’s largest banks, and for over 30 years he has supported kiwi families New Zealand wide to accomplish their goals.

With a particular interest in Consumer and Commercial Finance, to Distressed Situations. Governance and Strategy, Daz loves delving into the whys, hows and what-nexts for everyday New Zealanders.

Email: darren@quantumfinance.co.nz

Phone: 022 0800 129

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