Sunday, July 29, 2007

Interest rate rises and mortgages

Once again the OCR (Official Cash Rate) has been increased affecting our mortgage rates here in New Zealand. With interest rates constantly increasing here are some ideas to help prepare when your mortgage fixed rate comes up for review.

1. Complete a budget so that you know how much you have as a surplus. If there's a deficit and you have less money to spend than you have coming in, tweak your spending and see where you can save. Get rid of unnecessary spending. You may need to ‘pull your belts in’.

2. Don't put all your mortgage debt on to one term, split it so that you have say six months, one year, two years. This way you can take advantage of rates if they have lowered in the interim, or at least you won’t have them all maturing at the same time. Also if you have the benefit of receiving a lump sum payment (bonus or inheritance) you can pay it off one of the loans as they fall due.

3. Do not take a term longer than two years. This is only my personal opinion. I have seen too many people that have fixed for longer terms only to find they are locked in and if they want to sell or the rates have come down there are penalties to change the term.

I remember when interest rates where up to 22% - let’s hope we never see those kinds of rates again.

1 comment:

Anonymous said...

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