Interest rates are moving – apply the “sleep test”!

Around two-thirds of fixed rate loans are due to be rolled over this year. If yours are part of that group then you need to pay attention to what’s happening so you can make the best decision for your situation.

What’s going on?

Rates are moving, you may find when refixing you might not be able to lock in a rate close to what you had previously.

We have enjoyed some amazingly low rates over the past couple of years – many as low as 2%, however that is changing as (among other factors) the NZ inflation rate is rising. This requires the Reserve Bank to increase the OCR, which then results in higher interest rates for the consumer.

What do we think?

Our message to you is don’t panic, the main thing to understand is that when you were initially approved for your loan, you were assessed by the bank based on whether you could afford a much higher interest rate than what was offered at that time. The bank built in a nice buffer to allow for this situation, which means they already know that you can handle the current increases.

What should you do?

There is no right or wrong answer to the current situation, it’s all about what’s right for you – so apply the “sleep test”. If you are being kept awake at night worrying about rates continuing to increase, choosing a fixed rate term of 3, 4 or 5 years will give you the security of consistent repayments. Even if the interest is a little higher than that of the shorter terms on offer, it may be worth it if you sleep better and plan better knowing what your repayments are going to be.

If you aren’t worried by all the rates moving and what they may do, then a 1 or 2 year rate may be all that is needed to carry you through the coming months while we wait and see what the market does.

If you want to talk about it some more or your circumstances have changed, make contact with us and we can review everything together. It’s best to do that sooner rather than later so that you are organised and have a plan.


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