The latest market update on New Zealand interest rates

Interest rates - Our current market situation...

As discussed in Tony Alexanders' latest economist market update, the Silicon Valley Bank (SVB) collapse has had some flow-on effects to New Zealand's interest rates. We've just observed a decrease in the wholesale interest rates for the first time in a long time. For example, the one year swap rate at which banks borrow fixed to lend fixed has decreased from 5.65% to around 5.3% with the three-year swap rate decreasing from 5.25% to 4.75%.

Research suggests it may be a good idea to fix your interest rate for one year based on the current market. It also may be worth looking at least fixing a portion of your loan for two years. This is based on the idea that inflation may not ease as soon as we hope.

The next NZ cash rate review is on April 5th. It is likely that the reserve bank will once again lift the cash rate between 0.25-0.5%.

This information is based on current world events and theories and is no way intended for full financial advise. To fully understand your options and get an understanding of the market, please contact me today to go over a tailored plan that best suits your financial needs.

Q & A - Your questions answered by a mortgage advisor.

Q: What is the best term to fix my home loan for?
A: This depends on your individual financial situation and is always recommended you speak to an financial adviser around how your home loan fixed period relates to your financial goals and how you can structure your home loan to align with your future goal outcomes.

Q: What are my best options to ease my home loan repayments?
A: Here are some examples of ways you can ease your home loan repayments

1. Extend the term of your home loan.
2. Switch to an interest-only home loan option (if eligible).
3. Change your repayment frequency from monthly to fortnightly.
4. Refinance to another lender.
5. Offset your home loan against savings held, with a lender that offers this option of home loan.
6. Use any spare funds to reduce your home loan or make extra repayments as you can.
7. Request a home loan repayment holiday (if eligible).

*Before making any changes to your home loan it’s important to seek financial advice.

Q: What are the advantages of fixing a home loan?
A: The main advantage of a fixed rate is home loan repayment certainty. For a set period of time, you know exactly what your home loan repayments will be. This makes budgeting easier and you won’t be affected if interest rates rise within your set fixed interest rate period.

Q: What are the disadvantages?
A: The downside of a fixed home loan is you can’t opt out of your fixed term unless you pay a break fee, which could negate any potential savings. This also means you’ll miss out if interest rates drop within your fixed home loan interest rate period. In addition, some banks charge a fee if you make extra repayments during your home loan fixed rate period.

Q: Is it better to get a fixed or variable mortgage now?
A: This depends on your individual financial situation and is always recommended you speak to a financial adviser expert around how your home loan structure relates to your financial goals. Everyone’s financial situation differs which means there’s no one size fits all approach.

Q: How can I pay my home loan off faster?
A: Here’s 6 ways to pay off your home loan faster

1. Increase your home loan repayment amounts.
2. Structure your home loan with flexibility in mind.
3. Switch repayments from monthly to fortnightly.
4. Make lump sum payments as you can.
5. Make a portion of your home loan floating or on a revolving credit facility and aim to repay this amount as quickly as you can.
6. If your interest rate goes down, don’t reduce your repayments with it.

Q: Is refinancing my home loan an option?
A: Refinancing is a common option and makes sense if you’re looking to secure the best options possible for your home loan and to align with your financial goals. This could save you thousands in interest with an aim to pay off your home loan more quickly. It’s important to always look at what fees may be involved when making your decision to refinance.

Want to learn more about your options when it comes to a home loan and getting the best interest rate? Feel free to get in touch today and we can create a tailored plan best suited to your situation.

I look forward to hearing from you.

Fiona