Rising interest rates are bad news for first home buyers and borrowers alike, with new homeowners (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 signalling further interest rate hikes are on the horizon, how can homeowners 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.
If you’re not sure how your home loan is structured, contact your lender or mortgage adviser to help you work through the details. It’s worth booking in a home loan restructure check-in with a Mortgage Express branded adviser, to ensure you’re getting the best deal available to you, and that your home loan is structured to fit your requirements.
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 – like this one – to work out what your repayments are going to look like.
If your fixed rate term is nearing the end, now is a good time to discuss with your mortgage adviser locking in an interest rate. It’s also worthwhile comparing how your interest rates stack up against any other deals in the market, and this is something else your mortgage adviser can help you with.
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.
Take a close look at your budget to identify the expenses you can cut out or ways in which you can boost your income. Check that you’re getting the best deal for utilities – power, internet and phone – and pay down any high interest debt as soon as you can to help free up extra cash to divert into your home loan.
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 finding ways to cut back on unnecessary spending, building up a savings buffer could help you prepare for higher costs ahead.
If you’re concerned about the impact higher mortgage repayments could have on your financial situation, it’s best to seek help immediately. Contact your mortgage adviser or lender to discuss your situation before you miss any repayments.
Contact a Mortgage Express branded adviser if you have questions about your existing home loan and the impact higher interest rates could have on your financial situation.