In a significant development, the Official Cash Rate (OCR) has dropped for the first time in nine meetings, prompting major banks to reduce their interest rates. This marks the first glimmer of hope and positivity for homeowners in quite some time, especially as 62% of New Zealand mortgages are due for refinancing within the next 12 months.
What does this mean for you as a home owner?
For many, this is an opportunity to finally break free from those high-interest rates that have been squeezing household budgets. With further interest rate drops forecasted, the big question on everyone’s mind is how long should I fix for?
Should I refix for 6 months or longer?
Our recommendation is to consider fixing your mortgage for a period of 6 to 12 months. This strategy allows you the flexibility to refix your mortgage again when potentially even lower rates become available. However, it’s crucial to take into account your personal financial situation, including your cash flow and the level of security you need during this time.
What do I need to look out for?
While locking in a longer-term rate might seem appealing, there’s a risk of incurring high break fees if you need to reassess your loan sooner than expected. Unfortunately, these break fees are set by the lender and can’t be avoided. On the other hand, we understand that some homeowners are struggling to hold on and may not be able to wait for future drops. In such cases, a different approach might be necessary to ensure you can keep up with mortgage repayments.
If you’re thinking about moving, it’s vital to get your financial details sorted before you put your house on the market or make an offer on a property. Know your numbers—use our mortgage calculators and budgeting tools, which are freely available, to get a clear picture of your situation. The cost of breaking a fixed rate can be high, but there are options to explore, such as transferring your mortgage to your next property, provided you can align settlement dates and secure approval from your mortgage provider.
As always, we’re here to help you navigate these changes and find the best mortgage strategy for your needs. Whether you’re looking to refinance or considering a move, reach out to us for personalised advice that takes your unique circumstances into account.
*This article aims to offer a brief overview of the issues related to the covered topics as at September 2024.It does not claim to be exhaustive or offer tailored advice.
Becs McCallum
Senior Financial Advisor
021 379 919
becs.mccallum@loanmarket.co.nz
McCallum & Co. – Loan Market NZ
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