PHOTO: Mortgage interest rates are rising. How to keep more money in your pocket. FILE
Strategies to Offset the Cost of Living
Rising Mortgage Rates from ANZ and ASB
In the midst of a cost of living crisis, where many are seeking ways to cut expenses, New Zealand’s largest bank, ANZ, has once again increased its mortgage rates. The three-year rate now stands at 6.69 percent, and the one-year rate has reached 7.25 percent. These rate hikes follow closely on the heels of ASB, one of ANZ’s competitors, announcing their own rate increases.
Exploring Mortgage Savings Options
Given this scenario, you might be wondering: Is it possible to find ways to save money on your mortgage?
Maximizing Savings on Your Mortgage Interest in New Zealand
In a time of rising mortgage rates, New Zealanders are feeling the pinch of increased living costs. Mortgage rates, like those recently raised by ANZ and ASB, can put additional strain on household budgets. However, there are strategies you can employ to mitigate the impact and potentially save on your mortgage interest in New Zealand.
Refinancing for Better Rates
One of the most effective ways to reduce your mortgage interest is by refinancing your home loan. In New Zealand, various lenders compete for your business, and by shopping around, you may find a better deal. Keep a close eye on interest rate trends and consider refinancing to a fixed-rate mortgage if rates are expected to rise further. Fixed-rate mortgages offer stability in uncertain times, protecting you from future rate hikes.
Negotiate with Your Current Lender
Don’t underestimate the power of negotiation. If you’re a loyal customer with a good payment history, your current lender may be willing to offer you a lower interest rate. Contact them and inquire about the possibility of a rate reduction. They may be more inclined to accommodate your request than lose you as a customer.
Make Extra Payments
Every extra dollar you put towards your mortgage principal can save you interest in the long run. Consider making additional payments when you can. Even small, consistent extra payments can significantly reduce your overall interest payments and shorten the life of your loan.
Consider Biweekly Payments
Switching to biweekly payments instead of monthly can have a remarkable impact on your interest savings. By making half your monthly payment every two weeks, you’ll end up making an extra full payment over the course of a year. This extra payment can significantly reduce your loan balance and, consequently, the interest you’ll pay.
Use Offsetting Accounts
Many New Zealand mortgage lenders offer offsetting accounts. These accounts allow you to offset your savings against your mortgage balance, reducing the interest you pay. The interest on your mortgage is calculated on the difference between your mortgage balance and the amount in your offset account. By keeping your savings in this account, you effectively reduce the interest payable on your mortgage without actually making extra repayments.
Seek Professional Advice
Navigating the complex world of mortgages and interest rates can be daunting. Seeking advice from a mortgage broker or financial advisor can help you find the best mortgage solution tailored to your needs. They can also keep you informed about the latest interest rate trends and help you make informed decisions.
In the face of rising mortgage rates, saving on your mortgage interest in New Zealand is not only possible but essential for financial stability. Whether through refinancing, negotiation with your lender, or making extra payments, taking proactive steps can help you weather the current economic challenges while securing a brighter financial future. Explore these strategies and consult with professionals to determine the best course of action for your unique situation. By doing so, you can ensure that your mortgage remains a manageable and affordable aspect of your financial life.