Rising interest rates are bad news for first home buyers and borrowers alike, with new homeowners and investors (those who bought homes in the last 18 months) facing much higher mortgage repayments for the first time. With the Reserve Bank of New Zealand signaling further interest rate hikes are on the horizon, how can we avoid placing strain on already tight budgets and stay on top of bigger mortgage repayments?
Here are some options:
1. Check what mortgage you are currently on
The first step is to determine how your current mortgage is structured, as interest rate increases will affect the floating portion of your home loan, as well as any fixed interest rate terms that are ending that are going to be refixed.
2. Determine how interest rate increases impact you
Now that you know how your home loan is structured, your mortgage adviser can help you determine the impact any interest rate rises will have on your home loan repayments. You can also use a home loan repayment calculator to work out what your repayments are going to look like.
3. Devise a plan to help you manage higher repayments
The Reserve Bank (RBNZ) has warned that a noticeable number of households that borrowed for the first time in 2021 will find it difficult to pay their mortgages and cover all their other usual expenses. If you’re in this situation, start building up a savings buffer now to help you manage the higher repayments you are going to face in the year ahead.
4. Get expert advice about your financial situation
With more interest rate hikes predicted, it’s important to have a financial plan in place to help you cope with higher mortgage repayments. As well as finding ways to cut back unnecessary spending, building up a savings buffer could help you prepare for higher costs ahead.
5. Contact a Mortgage adviser
If you have questions about your existing home loan and the impact higher interest rates could have on your financial situation, reach out to a Mortgage adviser.
Harcourts is New Zealand’s largest and most trusted real estate group*, with over 2600 sales consultants across 197 offices and a growing property management team. For more information visit harcourts.co.nz. While every effort has been made to ensure that the information of the publication is accurate, we recommend that before relying on this information you seek independent specialist advice.
*Readers Digest Most Trusted Brand Survey 2013-2022.