Following the Reserve Bank’s decision to lower the official cash rate to 1.5 per cent early last month, banks have been quick to follow with lower mortgage rates, representing not only an opportunity for new buyers to enter the market, but also a chance for existing home owners to pay off their mortgage much faster. If you haven’t reviewed your mortgage recently, you could be missing out.
Reserve Bank cuts the OCR
Earlier in May 2019, the Reserve bank lowered the official cash rate to 1.5 per cent, the first cut since 2016 and the lowest OCR ever recorded. Many of the major banks have already made cuts to both floating and fixed interest rates and New Zealand looks set to enjoy a period of historically low mortgage rates for some time to come.
Analyst for CoreLogic, Kelvin Davidson said borrowers are "sitting pretty" at the moment and predicts fierce competition from the major lenders. He said: "Competition amongst the banks is already strong, ‘rate wars’ are frequent, and a lower-for-longer official cash rate also bodes well for mortgage rates over the next 1-2 years at least."
Davidson added, "Property sales volumes and prices should hold up relatively well (albeit not booming), especially since the prospect of capital gains tax has now been taken off the table.”
The Reserve Bank has indicated that rates could fall even further later this year.
Lower interest rates could make it more affordable for first home buyers entering the market, while for those home owners coming off a fixed term loan this may be a good time to review and switch to a floating interest rate instead.
Benefits of a mortgage review
When it comes to your home loan, every little bit helps. That’s why it’s important to review your mortgage from time to time and particularly when interest rates change. In a mortgage review, a Mortgage Express adviser will look at things like:
• Your mortgage term – by shortening your mortgage term and paying in slightly more each fortnight, you could reach your financial goals and get mortgage-free far quicker.
• Your interest rate – if your fixed term loan is coming to an end, there’s never been a better time to review your options. A Mortgage Express adviser can help you determine which finance option would best suit your needs – fixed vs. floating or a combination of both.
• Refinancing to tap into your home’s equity – a review of your mortgage will help you establish how much equity you have and whether you can access that to finance home improvements or renovations, a family holiday or emergency medical procedures. You may even have enough equity to fund the deposit for another property to help grow property portfolio.
Stay on top of it all
As with any changes in the property market, it’s important you have a good handle on what’s going on. By reviewing your mortgage, you’ll have a clearer understanding of how your finances look and potentially find opportunities for saving or investing further.
If you’d like to find out more about a mortgage review, get in touch with our team and we’ll connect you with one of our locally-based mortgage advisers who can set up a time to call you at a time that suits you.
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