With the Reserve Bank of New Zealand holding the Official Cash Rate (OCR) at 5.5 per cent in October 2023, borrowers are having to get used to higher interest rates and mortgage repayments, as a drop in interest rates this year seems unlikely. For those deciding whether to refix or refinance the mortgage, or for those grappling with a higher cost of living, here are 3 strategies to help reduce the impact of higher interest rates on mortgage repayments.

1. Keep a money diary

With inflation around the 6 per cent mark, far outside the target range, the Reserve Bank of New Zealand (RBNZ) has been raising the OCR to bring demand back into balance with supply. By increasing interest rates, the RBNZ aims to encourage New Zealanders to spend less and save more, which will help to rein in inflation.

With interest rates remaining at high levels, at least for the foreseeable future, now’s the time to keep a close eye on spending, by tracking where your money is going and looking for areas to trim back on. Even the smallest amounts add up over time so it’s worth making this a priority.

To track spending, write down every purchase in a money diary, using your phone, a spreadsheet, or a written journal. Do this for at least a week but a month is preferable, as it forces you to think about how much you’re spending and what it is that you’re buying.

While it might sound like a bit of a bore having to write down everything you spend, doing this can help entrench good spending habits. After all, it’s easy to lose track of your spending, especially when using a credit card or buy now pay later facilities.

A money diary is the first step in getting control of your budget by planning future spending and making changes to spending habits.

2. Don’t stop investing

With more pressure on the budget from a rising cost of living and higher mortgage repayments, it’s tempting to shy away from investments. But maintaining investments or continuing to invest wisely can be a smart financial strategy and a viable means of boosting long-term returns.

Diversifying your investments across various assets could help balance the impact of rising interest rates on your overall financial situation. If you can afford to save, even a small amount, then explore your investment options by seeking investment advice from a financial adviser who is able to provide financial advice relating to investment products.

3. Use cash instead of cards

Remember the saying, “Cash is king”? Well, New Zealanders don’t appear to agree. A survey by the RBNZ found that nearly nine out of ten Kiwis prefer paying for things without using cash, opting for electronic bank transfers or bank cards instead.

But that could be about to change, and cash could make a comeback in the fight to beat overspending. Many Kiwis who struggle to understand the value of the dollar when not physically using cash, could find it easier to visualise where their money goes when drawing it out and paying cash instead.

Using cash is a great way to help prioritise paying important expenses first, because once the money is spent it’s gone!

Need home loan advice?

While no one can predict with absolute certainty what the remainder of 2023 will bring, cutting back on spending, saving more, and planning ahead will ensure you’re prepared no matter what comes your way.

Another way to save money is to ensure your home loan is structured efficiently, helping you repay your mortgage faster and get debt-free sooner. Talk to the team of Mortgage Express branded mortgage advisers today, and get advice about refinancing, refixing and home loan restructuring.